Correlation Between Aveng and RMB Holdings

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

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

Diversification Opportunities for Aveng and RMB Holdings

0.76

Correlation Coefficient

Aveng  RMB Holdings

Poor diversification

The 3 months correlation between Aveng and RMB is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Aveng and RMB Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RMB Holdings and Aveng 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 Aveng are associated (or correlated) with RMB Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RMB Holdings has no effect on the direction of Aveng i.e., Aveng and RMB Holdings go up and down completely randomly.

Pair Corralation between Aveng and RMB Holdings

Assuming the 90 days trading horizon Aveng is expected to generate 1.0 times less return on investment than RMB Holdings. But when comparing it to its historical volatility, Aveng is 1.12 times less risky than RMB Holdings. It trades about 0.18 of its potential returns per unit of risk. RMB Holdings is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  4,200  in RMB Holdings on September 24, 2024 and sell it today you would earn a total of  200.00  from holding RMB Holdings or generate 4.76% return on investment over 90 days.

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

Aveng  vs.  RMB Holdings

Aveng

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aveng are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Aveng exhibited solid returns over the last few months and may actually be approaching a breakup point.

RMB Holdings

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RMB Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, RMB Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Aveng and RMB Holdings

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

The idea behind Aveng and RMB Holdings 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.

Check out your portfolio center.

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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.