Correlation Between Equifax and RCM Technologies

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

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

Diversification Opportunities for Equifax and RCM Technologies

-0.72

Correlation Coefficient

Equifax  RCM Technologies

Pay attention - limited upside

The 3 months correlation between Equifax and RCM is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Equifax and RCM Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RCM Technologies and Equifax 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 Equifax are associated (or correlated) with RCM Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RCM Technologies has no effect on the direction of Equifax i.e., Equifax and RCM Technologies go up and down completely randomly.

Pair Corralation between Equifax and RCM Technologies

Considering the 90-day investment horizon Equifax is expected to under-perform the RCM Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Equifax is 1.48 times less risky than RCM Technologies. The stock trades about -0.14 of its potential returns per unit of risk. The RCM Technologies is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,981  in RCM Technologies on September 2, 2024 and sell it today you would earn a total of  307.00  from holding RCM Technologies or generate 15.5% return on investment over 90 days.

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

Equifax  vs.  RCM Technologies

Equifax

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Equifax has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

RCM Technologies

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RCM Technologies are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal primary indicators, RCM Technologies unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Equifax and RCM Technologies

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

The idea behind Equifax and RCM Technologies 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.