Correlation Between RF Materials and HB Technology

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

Diversification Opportunities for RF Materials and HB Technology

0.32

Correlation Coefficient

RF Materials  HB Technology

Weak diversification

The 3 months correlation between 327260 and 078150 is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding RF Materials Co and HB Technology TD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HB Technology TD 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 HB Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HB Technology TD has no effect on the direction of RF Materials i.e., RF Materials and HB Technology go up and down completely randomly.

Pair Corralation between RF Materials and HB Technology

Assuming the 90 days trading horizon RF Materials is expected to generate 1.49 times less return on investment than HB Technology. But when comparing it to its historical volatility, RF Materials Co is 2.08 times less risky than HB Technology. It trades about 0.59 of its potential returns per unit of risk. HB Technology TD is currently generating about 0.42 of returns per unit of risk over similar time horizon. If you would invest  199,600  in HB Technology TD on October 24, 2024 and sell it today you would earn a total of  63,400  from holding HB Technology TD or generate 31.76% return on investment over 90 days.

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

RF Materials Co  vs.  HB Technology TD

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

HB Technology TD

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with RF Materials and HB Technology

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

The idea behind RF Materials Co and HB Technology TD 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.