Correlation Between RF Materials and CS BEARING

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

Diversification Opportunities for RF Materials and CS BEARING

0.65

Correlation Coefficient

RF Materials  CS BEARING

Poor diversification

The 3 months correlation between 327260 and 297090 is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding RF Materials Co and CS BEARING CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CS BEARING 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 CS BEARING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CS BEARING CoLtd has no effect on the direction of RF Materials i.e., RF Materials and CS BEARING go up and down completely randomly.

Pair Corralation between RF Materials and CS BEARING

Assuming the 90 days trading horizon RF Materials Co is expected to generate 0.9 times more return on investment than CS BEARING. However, RF Materials Co is 1.11 times less risky than CS BEARING. It trades about 0.19 of its potential returns per unit of risk. CS BEARING CoLtd is currently generating about 0.1 per unit of risk. If you would invest  472,500  in RF Materials Co on December 24, 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	Significant
Accuracy	100.0%
Values	Daily Returns

RF Materials Co  vs.  CS BEARING 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.

CS BEARING CoLtd

Risk-Adjusted Performance

OK

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

Pair Trading with RF Materials and CS BEARING

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

The idea behind RF Materials Co and CS BEARING 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.