Correlation Between Montauk Renewables and Radcom

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

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

Diversification Opportunities for Montauk Renewables and Radcom

-0.81

Correlation Coefficient

Montauk Renewables  Radcom

Pay attention - limited upside

The 3 months correlation between Montauk and Radcom is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Montauk Renewables and Radcom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Radcom and Montauk Renewables 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 Montauk Renewables are associated (or correlated) with Radcom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Radcom has no effect on the direction of Montauk Renewables i.e., Montauk Renewables and Radcom go up and down completely randomly.

Pair Corralation between Montauk Renewables and Radcom

Given the investment horizon of 90 days Montauk Renewables is expected to under-perform the Radcom. But the stock apears to be less risky and, when comparing its historical volatility, Montauk Renewables is 1.19 times less risky than Radcom. The stock trades about -0.28 of its potential returns per unit of risk. The Radcom is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,178  in Radcom on September 22, 2024 and sell it today you would earn a total of  11.00  from holding Radcom or generate 0.93% return on investment over 90 days.

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

Montauk Renewables  vs.  Radcom

Montauk Renewables

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Montauk Renewables has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Radcom

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with Montauk Renewables and Radcom

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

The idea behind Montauk Renewables and Radcom 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.