Correlation Between Lepanto Consolidated and RFM Corp

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

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

Diversification Opportunities for Lepanto Consolidated and RFM Corp

0.2

Correlation Coefficient

Lepanto Consolidated  RFM Corp

Modest diversification

The 3 months correlation between Lepanto and RFM is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Lepanto Consolidated Mining and RFM Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RFM Corp and Lepanto Consolidated 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 Lepanto Consolidated Mining 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 Lepanto Consolidated i.e., Lepanto Consolidated and RFM Corp go up and down completely randomly.

Pair Corralation between Lepanto Consolidated and RFM Corp

Assuming the 90 days trading horizon Lepanto Consolidated Mining is expected to under-perform the RFM Corp. In addition to that, Lepanto Consolidated is 2.4 times more volatile than RFM Corp. It trades about -0.02 of its total potential returns per unit of risk. RFM Corp is currently generating about 0.04 per unit of volatility. If you would invest  314.00  in RFM Corp on October 12, 2024 and sell it today you would earn a total of  84.00  from holding RFM Corp or generate 26.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	82.05%
Values	Daily Returns

Lepanto Consolidated Mining  vs.  RFM Corp

Lepanto Consolidated

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lepanto Consolidated Mining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

RFM Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RFM Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, RFM Corp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Lepanto Consolidated and RFM Corp

The main advantage of trading using opposite Lepanto Consolidated and RFM Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lepanto Consolidated 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 Lepanto Consolidated Mining 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.