Correlation Between Exponent and RCM Technologies

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

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

Diversification Opportunities for Exponent and RCM Technologies

-0.41

Correlation Coefficient

Exponent  RCM Technologies

Very good diversification

The 3 months correlation between Exponent and RCM is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Exponent and RCM Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RCM Technologies and Exponent 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 Exponent 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 Exponent i.e., Exponent and RCM Technologies go up and down completely randomly.

Pair Corralation between Exponent and RCM Technologies

Given the investment horizon of 90 days Exponent is expected to generate 0.77 times more return on investment than RCM Technologies. However, Exponent is 1.29 times less risky than RCM Technologies. It trades about 0.04 of its potential returns per unit of risk. RCM Technologies is currently generating about -0.01 per unit of risk. If you would invest  8,225  in Exponent on September 2, 2024 and sell it today you would earn a total of  1,646  from holding Exponent or generate 20.01% return on investment over 90 days.

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

Exponent  vs.  RCM Technologies

Exponent

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Exponent has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Exponent is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the 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 Exponent and RCM Technologies

The main advantage of trading using opposite Exponent and RCM Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exponent 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 Exponent 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.

Check out your portfolio center.

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 Commodity Directory module to find actively traded commodities issued by global exchanges.