Correlation Between RF Materials and PI Advanced

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

Diversification Opportunities for RF Materials and PI Advanced

0.44

Correlation Coefficient

RF Materials  PI Advanced

Very weak diversification

The 3 months correlation between 327260 and 178920 is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding RF Materials Co and PI Advanced Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PI Advanced Materials 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 PI Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PI Advanced Materials has no effect on the direction of RF Materials i.e., RF Materials and PI Advanced go up and down completely randomly.

Pair Corralation between RF Materials and PI Advanced

Assuming the 90 days trading horizon RF Materials Co is expected to generate 0.97 times more return on investment than PI Advanced. However, RF Materials Co is 1.03 times less risky than PI Advanced. It trades about 0.14 of its potential returns per unit of risk. PI Advanced Materials is currently generating about 0.0 per unit of risk. If you would invest  477,500  in RF Materials Co on December 29, 2024 and sell it today you would earn a total of  123,500  from holding RF Materials Co or generate 25.86% 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.  PI Advanced Materials

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 11 (%) 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.

PI Advanced Materials

Risk-Adjusted Performance

Very Weak

Over the last 90 days PI Advanced Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, PI Advanced 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 PI Advanced

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

The idea behind RF Materials Co and PI Advanced Materials 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 Commodity Directory module to find actively traded commodities issued by global exchanges.