Correlation Between NN and RCABS

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

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

Diversification Opportunities for NN and RCABS

0.27

Correlation Coefficient

NN  RCABS

Modest diversification

The 3 months correlation between NN and RCABS is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding NN Inc and RCABS Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RCABS Inc and NN 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 NN Inc are associated (or correlated) with RCABS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RCABS Inc has no effect on the direction of NN i.e., NN and RCABS go up and down completely randomly.

Pair Corralation between NN and RCABS

Given the investment horizon of 90 days NN Inc is expected to under-perform the RCABS. But the stock apears to be less risky and, when comparing its historical volatility, NN Inc is 2.89 times less risky than RCABS. The stock trades about -0.1 of its potential returns per unit of risk. The RCABS Inc is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  0.09  in RCABS Inc on December 26, 2024 and sell it today you would lose (0.04) from holding RCABS Inc or give up 44.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

NN Inc  vs.  RCABS Inc

NN Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days NN Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's fundamental drivers remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

RCABS Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days RCABS Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with NN and RCABS

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

The idea behind NN Inc and RCABS Inc 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.