Correlation Between RPBio and Choil Aluminum

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

By analyzing existing cross correlation between RPBio Inc and Choil Aluminum, you can compare the effects of market volatilities on RPBio and Choil Aluminum 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 RPBio with a short position of Choil Aluminum. Check out your portfolio center. Please also check ongoing floating volatility patterns of RPBio and Choil Aluminum.

Diversification Opportunities for RPBio and Choil Aluminum

0.95

Correlation Coefficient

RPBio  Choil Aluminum

Almost no diversification

The 3 months correlation between RPBio and Choil is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding RPBio Inc and Choil Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Choil Aluminum and RPBio 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 RPBio Inc are associated (or correlated) with Choil Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Choil Aluminum has no effect on the direction of RPBio i.e., RPBio and Choil Aluminum go up and down completely randomly.

Pair Corralation between RPBio and Choil Aluminum

Assuming the 90 days trading horizon RPBio Inc is expected to under-perform the Choil Aluminum. But the stock apears to be less risky and, when comparing its historical volatility, RPBio Inc is 1.3 times less risky than Choil Aluminum. The stock trades about -0.06 of its potential returns per unit of risk. The Choil Aluminum is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  214,000  in Choil Aluminum on October 9, 2024 and sell it today you would lose (68,400) from holding Choil Aluminum or give up 31.96% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.79%
Values	Daily Returns

RPBio Inc  vs.  Choil Aluminum

RPBio Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RPBio Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Choil Aluminum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Choil Aluminum has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with RPBio and Choil Aluminum

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

The idea behind RPBio Inc and Choil Aluminum 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .