Correlation Between Ritek Corp and CMC Magnetics

Can any of the company-specific risk be diversified away by investing in both Ritek Corp and CMC Magnetics at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Ritek Corp and CMC Magnetics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ritek Corp and CMC Magnetics Corp, you can compare the effects of market volatilities on Ritek Corp and CMC Magnetics and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Ritek Corp with a short position of CMC Magnetics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ritek Corp and CMC Magnetics.

Diversification Opportunities for Ritek Corp and CMC Magnetics

0.91

Correlation Coefficient

Ritek Corp  CMC Magnetics

Almost no diversification

The 3 months correlation between Ritek and CMC is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Ritek Corp and CMC Magnetics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CMC Magnetics Corp and Ritek Corp is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Ritek Corp are associated (or correlated) with CMC Magnetics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CMC Magnetics Corp has no effect on the direction of Ritek Corp i.e., Ritek Corp and CMC Magnetics go up and down completely randomly.

Pair Corralation between Ritek Corp and CMC Magnetics

Assuming the 90 days trading horizon Ritek Corp is expected to under-perform the CMC Magnetics. In addition to that, Ritek Corp is 1.02 times more volatile than CMC Magnetics Corp. It trades about -0.24 of its total potential returns per unit of risk. CMC Magnetics Corp is currently generating about -0.16 per unit of volatility. If you would invest  1,145  in CMC Magnetics Corp on December 4, 2024 and sell it today you would lose (148.00) from holding CMC Magnetics Corp or give up 12.93% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Ritek Corp  vs.  CMC Magnetics Corp

Ritek Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ritek Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

CMC Magnetics Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days CMC Magnetics Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Ritek Corp and CMC Magnetics

The main advantage of trading using opposite Ritek Corp and CMC Magnetics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ritek Corp position performs unexpectedly, CMC Magnetics can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in CMC Magnetics will offset losses from the drop in CMC Magnetics' long position.

The idea behind Ritek Corp and CMC Magnetics Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Bonds Directory module to find actively traded corporate debentures issued by US companies.