Correlation Between Arcadium Lithium and Radcom

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

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

Diversification Opportunities for Arcadium Lithium and Radcom

-0.24

Correlation Coefficient

Arcadium Lithium  Radcom

Very good diversification

The 3 months correlation between Arcadium and Radcom is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Arcadium Lithium Plc and Radcom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Radcom and Arcadium Lithium 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 Arcadium Lithium Plc are associated (or correlated) with Radcom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Radcom has no effect on the direction of Arcadium Lithium i.e., Arcadium Lithium and Radcom go up and down completely randomly.

Pair Corralation between Arcadium Lithium and Radcom

Given the investment horizon of 90 days Arcadium Lithium Plc is expected to generate 0.33 times more return on investment than Radcom. However, Arcadium Lithium Plc is 3.04 times less risky than Radcom. It trades about 0.22 of its potential returns per unit of risk. Radcom is currently generating about 0.03 per unit of risk. If you would invest  514.00  in Arcadium Lithium Plc on December 29, 2024 and sell it today you would earn a total of  70.00  from holding Arcadium Lithium Plc or generate 13.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	73.77%
Values	Daily Returns

Arcadium Lithium Plc  vs.  Radcom

Arcadium Lithium Plc

Risk-Adjusted Performance

Solid

Over the last 90 days Arcadium Lithium Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very unsteady basic indicators, Arcadium Lithium displayed solid returns over the last few months and may actually be approaching a breakup point.

Radcom

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Radcom are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Radcom may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Arcadium Lithium and Radcom

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

The idea behind Arcadium Lithium Plc and Radcom 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.