Correlation Between RCABS and ML Capital

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

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

Diversification Opportunities for RCABS and ML Capital

0.43

Correlation Coefficient

RCABS  ML Capital

Very weak diversification

The 3 months correlation between RCABS and MLCG is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding RCABS Inc and ML Capital Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ML Capital Group and RCABS 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 RCABS Inc are associated (or correlated) with ML Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ML Capital Group has no effect on the direction of RCABS i.e., RCABS and ML Capital go up and down completely randomly.

Pair Corralation between RCABS and ML Capital

Given the investment horizon of 90 days RCABS Inc is expected to under-perform the ML Capital. But the pink sheet apears to be less risky and, when comparing its historical volatility, RCABS Inc is 2.18 times less risky than ML Capital. The pink sheet trades about -0.01 of its potential returns per unit of risk. The ML Capital Group is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  22.00  in ML Capital Group on September 14, 2024 and sell it today you would lose (21.99) from holding ML Capital Group or give up 99.95% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

RCABS Inc  vs.  ML Capital Group

RCABS Inc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in RCABS Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, RCABS sustained solid returns over the last few months and may actually be approaching a breakup point.

ML Capital Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ML Capital Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with RCABS and ML Capital

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

The idea behind RCABS Inc and ML Capital Group 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.