Correlation Between RCABS and SPO Global

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

By analyzing existing cross correlation between RCABS Inc and SPO Global, you can compare the effects of market volatilities on RCABS and SPO Global 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 SPO Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of RCABS and SPO Global.

Diversification Opportunities for RCABS and SPO Global

0.89

Correlation Coefficient

RCABS  SPO Global

Very poor diversification

The 3 months correlation between RCABS and SPO is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding RCABS Inc and SPO Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPO Global 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 SPO Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPO Global has no effect on the direction of RCABS i.e., RCABS and SPO Global go up and down completely randomly.

Pair Corralation between RCABS and SPO Global

Given the investment horizon of 90 days RCABS Inc is expected to generate 1.23 times more return on investment than SPO Global. However, RCABS is 1.23 times more volatile than SPO Global. It trades about -0.04 of its potential returns per unit of risk. SPO Global is currently generating about -0.15 per unit of risk. If you would invest  0.09  in RCABS Inc on December 19, 2024 and sell it today you would lose (0.05) from holding RCABS Inc or give up 55.56% of portfolio value over 90 days.

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

RCABS Inc  vs.  SPO Global

RCABS Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days RCABS Inc 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 basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

SPO Global

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPO Global has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with RCABS and SPO Global

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

The idea behind RCABS Inc and SPO Global 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.