Correlation Between Rafael Microelectronics and Phytohealth Corp

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

By analyzing existing cross correlation between Rafael Microelectronics and Phytohealth Corp, you can compare the effects of market volatilities on Rafael Microelectronics and Phytohealth Corp 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 Phytohealth Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rafael Microelectronics and Phytohealth Corp.

Diversification Opportunities for Rafael Microelectronics and Phytohealth Corp

0.57

Correlation Coefficient

Rafael Microelectronics  Phytohealth Corp

Very weak diversification

The 3 months correlation between Rafael and Phytohealth is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Rafael Microelectronics and Phytohealth Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phytohealth Corp 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 Phytohealth Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Phytohealth Corp has no effect on the direction of Rafael Microelectronics i.e., Rafael Microelectronics and Phytohealth Corp go up and down completely randomly.

Pair Corralation between Rafael Microelectronics and Phytohealth Corp

Assuming the 90 days trading horizon Rafael Microelectronics is expected to under-perform the Phytohealth Corp. In addition to that, Rafael Microelectronics is 1.15 times more volatile than Phytohealth Corp. It trades about -0.01 of its total potential returns per unit of risk. Phytohealth Corp is currently generating about -0.01 per unit of volatility. If you would invest  1,910  in Phytohealth Corp on September 24, 2024 and sell it today you would lose (330.00) from holding Phytohealth Corp or give up 17.28% of portfolio value over 90 days.

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

Rafael Microelectronics  vs.  Phytohealth Corp

Rafael Microelectronics

Risk-Adjusted Performance

0 of 100

Very Weak

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

Phytohealth Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Phytohealth Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Rafael Microelectronics and Phytohealth Corp

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

The idea behind Rafael Microelectronics and Phytohealth Corp 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.