Correlation Between Applied Finance and Rmb Fund

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

By analyzing existing cross correlation between Applied Finance Explorer and Rmb Fund I, you can compare the effects of market volatilities on Applied Finance and Rmb Fund 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 Applied Finance with a short position of Rmb Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Finance and Rmb Fund.

Diversification Opportunities for Applied Finance and Rmb Fund

0.88

Correlation Coefficient

Applied Finance  Rmb Fund

Very poor diversification

The 3 months correlation between Applied and RMB is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Applied Finance Explorer and Rmb Fund I in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rmb Fund I and Applied Finance 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 Applied Finance Explorer are associated (or correlated) with Rmb Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rmb Fund I has no effect on the direction of Applied Finance i.e., Applied Finance and Rmb Fund go up and down completely randomly.

Pair Corralation between Applied Finance and Rmb Fund

Assuming the 90 days horizon Applied Finance Explorer is expected to generate 1.33 times more return on investment than Rmb Fund. However, Applied Finance is 1.33 times more volatile than Rmb Fund I. It trades about 0.24 of its potential returns per unit of risk. Rmb Fund I is currently generating about 0.05 per unit of risk. If you would invest  2,191  in Applied Finance Explorer on October 25, 2024 and sell it today you would earn a total of  96.00  from holding Applied Finance Explorer or generate 4.38% return on investment over 90 days.

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

Applied Finance Explorer  vs.  Rmb Fund I

Applied Finance Explorer

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Applied Finance Explorer are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Applied Finance is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Rmb Fund I

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rmb Fund I has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Rmb Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Applied Finance and Rmb Fund

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

The idea behind Applied Finance Explorer and Rmb Fund I 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..