Correlation Between RF Materials and MohenzCoLtd

Can any of the company-specific risk be diversified away by investing in both RF Materials and MohenzCoLtd 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 MohenzCoLtd 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 MohenzCoLtd, you can compare the effects of market volatilities on RF Materials and MohenzCoLtd 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 MohenzCoLtd. Check out your portfolio center. Please also check ongoing floating volatility patterns of RF Materials and MohenzCoLtd.

Diversification Opportunities for RF Materials and MohenzCoLtd

-0.21

Correlation Coefficient

RF Materials  MohenzCoLtd

Very good diversification

The 3 months correlation between 327260 and MohenzCoLtd is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding RF Materials Co and MohenzCoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MohenzCoLtd 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 MohenzCoLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MohenzCoLtd has no effect on the direction of RF Materials i.e., RF Materials and MohenzCoLtd go up and down completely randomly.

Pair Corralation between RF Materials and MohenzCoLtd

Assuming the 90 days trading horizon RF Materials Co is expected to under-perform the MohenzCoLtd. In addition to that, RF Materials is 1.48 times more volatile than MohenzCoLtd. It trades about -0.11 of its total potential returns per unit of risk. MohenzCoLtd is currently generating about 0.08 per unit of volatility. If you would invest  280,000  in MohenzCoLtd on September 15, 2024 and sell it today you would earn a total of  33,500  from holding MohenzCoLtd or generate 11.96% return on investment over 90 days.

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

RF Materials Co  vs.  MohenzCoLtd

RF Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RF Materials Co 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

MohenzCoLtd

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MohenzCoLtd are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, MohenzCoLtd sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with RF Materials and MohenzCoLtd

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

The idea behind RF Materials Co and MohenzCoLtd 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.