Correlation Between RF Materials and MS Autotech

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

Diversification Opportunities for RF Materials and MS Autotech

0.26

Correlation Coefficient

RF Materials  MS Autotech

Modest diversification

The 3 months correlation between 327260 and 123040 is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding RF Materials Co and MS Autotech CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MS Autotech CoLtd 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 MS Autotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MS Autotech CoLtd has no effect on the direction of RF Materials i.e., RF Materials and MS Autotech go up and down completely randomly.

Pair Corralation between RF Materials and MS Autotech

Assuming the 90 days trading horizon RF Materials Co is expected to generate 1.05 times more return on investment than MS Autotech. However, RF Materials is 1.05 times more volatile than MS Autotech CoLtd. It trades about 0.19 of its potential returns per unit of risk. MS Autotech CoLtd is currently generating about 0.01 per unit of risk. If you would invest  472,500  in RF Materials Co on December 23, 2024 and sell it today you would earn a total of  174,500  from holding RF Materials Co or generate 36.93% 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.  MS Autotech CoLtd

RF Materials

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RF Materials Co are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, RF Materials sustained solid returns over the last few months and may actually be approaching a breakup point.

MS Autotech CoLtd

Risk-Adjusted Performance

Very Weak

Over the last 90 days MS Autotech CoLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, MS Autotech is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with RF Materials and MS Autotech

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

The idea behind RF Materials Co and MS Autotech CoLtd 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.