Correlation Between Aldel Financial and RH

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

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

Diversification Opportunities for Aldel Financial and RH

-0.6

Correlation Coefficient

Aldel Financial  RH

Excellent diversification

The 3 months correlation between Aldel and RH is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Aldel Financial II and RH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RH and Aldel Financial 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 Aldel Financial II are associated (or correlated) with RH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RH has no effect on the direction of Aldel Financial i.e., Aldel Financial and RH go up and down completely randomly.

Pair Corralation between Aldel Financial and RH

Given the investment horizon of 90 days Aldel Financial is expected to generate 23.1 times less return on investment than RH. But when comparing it to its historical volatility, Aldel Financial II is 30.84 times less risky than RH. It trades about 0.23 of its potential returns per unit of risk. RH is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  32,745  in RH on October 24, 2024 and sell it today you would earn a total of  11,978  from holding RH or generate 36.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	40.68%
Values	Daily Returns

Aldel Financial II  vs.  RH

Aldel Financial II

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aldel Financial II are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Aldel Financial is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

RH

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RH are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain technical indicators, RH demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aldel Financial and RH

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

The idea behind Aldel Financial II and RH 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.