Correlation Between AGF Management and Rai Way

Can any of the company-specific risk be diversified away by investing in both AGF Management and Rai Way 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 AGF Management and Rai Way into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AGF Management Limited and Rai Way SpA, you can compare the effects of market volatilities on AGF Management and Rai Way 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 AGF Management with a short position of Rai Way. Check out your portfolio center. Please also check ongoing floating volatility patterns of AGF Management and Rai Way.

Diversification Opportunities for AGF Management and Rai Way

0.41

Correlation Coefficient

AGF Management  Rai Way

Very weak diversification

The 3 months correlation between AGF and Rai is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding AGF Management Limited and Rai Way SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rai Way SpA and AGF Management 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 AGF Management Limited are associated (or correlated) with Rai Way. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rai Way SpA has no effect on the direction of AGF Management i.e., AGF Management and Rai Way go up and down completely randomly.

Pair Corralation between AGF Management and Rai Way

Assuming the 90 days horizon AGF Management is expected to generate 1.65 times less return on investment than Rai Way. But when comparing it to its historical volatility, AGF Management Limited is 1.01 times less risky than Rai Way. It trades about 0.06 of its potential returns per unit of risk. Rai Way SpA is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  508.00  in Rai Way SpA on December 2, 2024 and sell it today you would earn a total of  46.00  from holding Rai Way SpA or generate 9.06% return on investment over 90 days.

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

AGF Management Limited  vs.  Rai Way SpA

AGF Management

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AGF Management Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, AGF Management is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Rai Way SpA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rai Way SpA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Rai Way may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with AGF Management and Rai Way

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

The idea behind AGF Management Limited and Rai Way SpA 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 Channel module to use Commodity Channel Index to analyze current equity momentum.