Correlation Between Big Tech and Rapac Communication

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

By analyzing existing cross correlation between Big Tech 50 and Rapac Communication Infrastructure, you can compare the effects of market volatilities on Big Tech and Rapac Communication 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 Big Tech with a short position of Rapac Communication. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big Tech and Rapac Communication.

Diversification Opportunities for Big Tech and Rapac Communication

0.3

Correlation Coefficient

Big Tech  Rapac Communication

Weak diversification

The 3 months correlation between Big and Rapac is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Big Tech 50 and Rapac Communication Infrastruc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rapac Communication and Big Tech 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 Big Tech 50 are associated (or correlated) with Rapac Communication. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rapac Communication has no effect on the direction of Big Tech i.e., Big Tech and Rapac Communication go up and down completely randomly.

Pair Corralation between Big Tech and Rapac Communication

Assuming the 90 days trading horizon Big Tech 50 is expected to generate 2.93 times more return on investment than Rapac Communication. However, Big Tech is 2.93 times more volatile than Rapac Communication Infrastructure. It trades about 0.13 of its potential returns per unit of risk. Rapac Communication Infrastructure is currently generating about 0.25 per unit of risk. If you would invest  11,970  in Big Tech 50 on December 29, 2024 and sell it today you would earn a total of  4,890  from holding Big Tech 50 or generate 40.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.08%
Values	Daily Returns

Big Tech 50  vs.  Rapac Communication Infrastruc

Big Tech 50

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Big Tech 50 are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Big Tech sustained solid returns over the last few months and may actually be approaching a breakup point.

Rapac Communication

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Rapac Communication Infrastructure are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Rapac Communication sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Big Tech and Rapac Communication

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

The idea behind Big Tech 50 and Rapac Communication Infrastructure 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 Transaction History module to view history of all your transactions and understand their impact on performance.