Correlation Between Metalink and Radcom

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

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

Diversification Opportunities for Metalink and Radcom

0.76

Correlation Coefficient

Metalink  Radcom

Poor diversification

The 3 months correlation between Metalink and Radcom is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Metalink and Radcom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Radcom and Metalink 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 Metalink 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 Metalink i.e., Metalink and Radcom go up and down completely randomly.

Pair Corralation between Metalink and Radcom

Given the investment horizon of 90 days Metalink is expected to generate 16.71 times more return on investment than Radcom. However, Metalink is 16.71 times more volatile than Radcom. It trades about 0.04 of its potential returns per unit of risk. Radcom is currently generating about 0.03 per unit of risk. If you would invest  58.00  in Metalink on October 21, 2024 and sell it today you would lose (15.00) from holding Metalink or give up 25.86% of portfolio value over 90 days.

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

Metalink  vs.  Radcom

Metalink

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Metalink are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Metalink is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Radcom

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Radcom are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Radcom displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Metalink and Radcom

The main advantage of trading using opposite Metalink and Radcom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metalink 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 Metalink 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.