Correlation Between GT Capital and RFM Corp

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

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

Diversification Opportunities for GT Capital and RFM Corp

-0.55

Correlation Coefficient

GT Capital  RFM Corp

Excellent diversification

The 3 months correlation between GTCAP and RFM is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding GT Capital Holdings and RFM Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RFM Corp and GT Capital 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 GT Capital Holdings 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 GT Capital i.e., GT Capital and RFM Corp go up and down completely randomly.

Pair Corralation between GT Capital and RFM Corp

Assuming the 90 days trading horizon GT Capital Holdings is expected to under-perform the RFM Corp. In addition to that, GT Capital is 1.61 times more volatile than RFM Corp. It trades about -0.08 of its total potential returns per unit of risk. RFM Corp is currently generating about 0.08 per unit of volatility. If you would invest  370.00  in RFM Corp on October 7, 2024 and sell it today you would earn a total of  19.00  from holding RFM Corp or generate 5.14% return on investment over 90 days.

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

GT Capital Holdings  vs.  RFM Corp

GT Capital Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GT Capital Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

RFM Corp

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days RFM Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, RFM Corp is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with GT Capital and RFM Corp

The main advantage of trading using opposite GT Capital and RFM Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GT Capital 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 GT Capital Holdings 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.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.