Correlation Between Alliance Select and RFM Corp

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

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

Diversification Opportunities for Alliance Select and RFM Corp

-0.5

Correlation Coefficient

Alliance Select  RFM Corp

Very good diversification

The 3 months correlation between Alliance and RFM is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Select Foods and RFM Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RFM Corp and Alliance Select 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 Alliance Select Foods 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 Alliance Select i.e., Alliance Select and RFM Corp go up and down completely randomly.

Pair Corralation between Alliance Select and RFM Corp

Assuming the 90 days trading horizon Alliance Select Foods is expected to under-perform the RFM Corp. In addition to that, Alliance Select is 1.35 times more volatile than RFM Corp. It trades about -0.39 of its total potential returns per unit of risk. RFM Corp is currently generating about -0.05 per unit of volatility. If you would invest  390.00  in RFM Corp on September 25, 2024 and sell it today you would lose (5.00) from holding RFM Corp or give up 1.28% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	59.09%
Values	Daily Returns

Alliance Select Foods  vs.  RFM Corp

Alliance Select Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alliance Select Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private 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 Alliance Select and RFM Corp

The main advantage of trading using opposite Alliance Select and RFM Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alliance Select 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 Alliance Select Foods 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.