Correlation Between Converge Information and RFM Corp

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

By analyzing existing cross correlation between Converge Information Communications and RFM Corp, you can compare the effects of market volatilities on Converge Information and RFM Corp 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 Converge Information with a short position of RFM Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Converge Information and RFM Corp.

Diversification Opportunities for Converge Information and RFM Corp

-0.49

Correlation Coefficient

Converge Information  RFM Corp

Very good diversification

The 3 months correlation between Converge and RFM is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Converge Information Communica and RFM Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RFM Corp and Converge Information 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 Converge Information Communications are associated (or correlated) with RFM Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RFM Corp has no effect on the direction of Converge Information i.e., Converge Information and RFM Corp go up and down completely randomly.

Pair Corralation between Converge Information and RFM Corp

Assuming the 90 days trading horizon Converge Information Communications is expected to generate 1.82 times more return on investment than RFM Corp. However, Converge Information is 1.82 times more volatile than RFM Corp. It trades about 0.03 of its potential returns per unit of risk. RFM Corp is currently generating about -0.05 per unit of risk. If you would invest  1,624  in Converge Information Communications on September 25, 2024 and sell it today you would earn a total of  14.00  from holding Converge Information Communications or generate 0.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Converge Information Communica  vs.  RFM Corp

Converge Information

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Converge Information Communications has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Converge Information is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

RFM Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in RFM Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, RFM Corp is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Converge Information and RFM Corp

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

The idea behind Converge Information Communications and RFM Corp 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..