Correlation Between Ruentex Development and Rafael Microelectronics

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

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

Diversification Opportunities for Ruentex Development and Rafael Microelectronics

-0.51

Correlation Coefficient

Ruentex Development  Rafael Microelectronics

Excellent diversification

The 3 months correlation between Ruentex and Rafael is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Ruentex Development Co and Rafael Microelectronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rafael Microelectronics and Ruentex Development 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 Ruentex Development Co are associated (or correlated) with Rafael Microelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rafael Microelectronics has no effect on the direction of Ruentex Development i.e., Ruentex Development and Rafael Microelectronics go up and down completely randomly.

Pair Corralation between Ruentex Development and Rafael Microelectronics

Assuming the 90 days trading horizon Ruentex Development Co is expected to under-perform the Rafael Microelectronics. But the stock apears to be less risky and, when comparing its historical volatility, Ruentex Development Co is 2.61 times less risky than Rafael Microelectronics. The stock trades about -0.11 of its potential returns per unit of risk. The Rafael Microelectronics is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  12,900  in Rafael Microelectronics on December 4, 2024 and sell it today you would earn a total of  2,100  from holding Rafael Microelectronics or generate 16.28% return on investment over 90 days.

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

Ruentex Development Co  vs.  Rafael Microelectronics

Ruentex Development

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ruentex Development Co 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.

Rafael Microelectronics

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rafael Microelectronics are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Rafael Microelectronics showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ruentex Development and Rafael Microelectronics

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

The idea behind Ruentex Development Co and Rafael Microelectronics 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.