Correlation Between RF Materials and Taeyang Metal

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

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

Diversification Opportunities for RF Materials and Taeyang Metal

0.4

Correlation Coefficient

RF Materials  Taeyang Metal

Very weak diversification

The 3 months correlation between 327260 and Taeyang is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding RF Materials Co and Taeyang Metal Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taeyang Metal Industrial and RF Materials 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 RF Materials Co are associated (or correlated) with Taeyang Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taeyang Metal Industrial has no effect on the direction of RF Materials i.e., RF Materials and Taeyang Metal go up and down completely randomly.

Pair Corralation between RF Materials and Taeyang Metal

Assuming the 90 days trading horizon RF Materials is expected to generate 3.47 times less return on investment than Taeyang Metal. But when comparing it to its historical volatility, RF Materials Co is 1.72 times less risky than Taeyang Metal. It trades about 0.05 of its potential returns per unit of risk. Taeyang Metal Industrial is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  398,471  in Taeyang Metal Industrial on December 2, 2024 and sell it today you would earn a total of  122,529  from holding Taeyang Metal Industrial or generate 30.75% return on investment over 90 days.

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

RF Materials Co  vs.  Taeyang Metal Industrial

RF Materials

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in RF Materials Co are ranked lower than 3 (%) 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.

Taeyang Metal Industrial

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Taeyang Metal Industrial are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Taeyang Metal sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with RF Materials and Taeyang Metal

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

The idea behind RF Materials Co and Taeyang Metal Industrial 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.