Correlation Between Rafael Microelectronics and Holy Stone

Can any of the company-specific risk be diversified away by investing in both Rafael Microelectronics and Holy Stone 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 Rafael Microelectronics and Holy Stone into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Rafael Microelectronics and Holy Stone Enterprise, you can compare the effects of market volatilities on Rafael Microelectronics and Holy Stone 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 Rafael Microelectronics with a short position of Holy Stone. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rafael Microelectronics and Holy Stone.

Diversification Opportunities for Rafael Microelectronics and Holy Stone

0.16

Correlation Coefficient

Rafael Microelectronics  Holy Stone

Average diversification

The 3 months correlation between Rafael and Holy is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Rafael Microelectronics and Holy Stone Enterprise in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Holy Stone Enterprise and Rafael Microelectronics 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 Rafael Microelectronics are associated (or correlated) with Holy Stone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Holy Stone Enterprise has no effect on the direction of Rafael Microelectronics i.e., Rafael Microelectronics and Holy Stone go up and down completely randomly.

Pair Corralation between Rafael Microelectronics and Holy Stone

Assuming the 90 days trading horizon Rafael Microelectronics is expected to generate 6.66 times more return on investment than Holy Stone. However, Rafael Microelectronics is 6.66 times more volatile than Holy Stone Enterprise. It trades about 0.25 of its potential returns per unit of risk. Holy Stone Enterprise is currently generating about 0.03 per unit of risk. If you would invest  12,150  in Rafael Microelectronics on October 23, 2024 and sell it today you would earn a total of  1,850  from holding Rafael Microelectronics or generate 15.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Rafael Microelectronics  vs.  Holy Stone Enterprise

Rafael Microelectronics

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rafael Microelectronics are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Rafael Microelectronics may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Holy Stone Enterprise

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Holy Stone Enterprise has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Holy Stone is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Rafael Microelectronics and Holy Stone

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

The idea behind Rafael Microelectronics and Holy Stone Enterprise 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.