Correlation Between SV Investment and RF Materials

Can any of the company-specific risk be diversified away by investing in both SV Investment and RF Materials 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 SV Investment and RF Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SV Investment and RF Materials Co, you can compare the effects of market volatilities on SV Investment and RF Materials 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 SV Investment with a short position of RF Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of SV Investment and RF Materials.

Diversification Opportunities for SV Investment and RF Materials

0.53

Correlation Coefficient

SV Investment  RF Materials

Very weak diversification

The 3 months correlation between 289080 and 327260 is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding SV Investment and RF Materials Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RF Materials and SV Investment 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 SV Investment are associated (or correlated) with RF Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RF Materials has no effect on the direction of SV Investment i.e., SV Investment and RF Materials go up and down completely randomly.

Pair Corralation between SV Investment and RF Materials

Assuming the 90 days trading horizon SV Investment is expected to generate 0.87 times more return on investment than RF Materials. However, SV Investment is 1.15 times less risky than RF Materials. It trades about -0.02 of its potential returns per unit of risk. RF Materials Co is currently generating about -0.04 per unit of risk. If you would invest  213,600  in SV Investment on December 4, 2024 and sell it today you would lose (71,100) from holding SV Investment or give up 33.29% of portfolio value over 90 days.

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

SV Investment  vs.  RF Materials Co

SV Investment

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SV Investment are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, SV Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

RF Materials

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in RF Materials Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, RF Materials may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with SV Investment and RF Materials

The main advantage of trading using opposite SV Investment and RF Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SV Investment position performs unexpectedly, RF Materials 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 RF Materials will offset losses from the drop in RF Materials' long position.

The idea behind SV Investment and RF Materials Co 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.