Correlation Between Philex Mining and RFM Corp

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

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

Diversification Opportunities for Philex Mining and RFM Corp

0.88

Correlation Coefficient

Philex Mining  RFM Corp

Very poor diversification

The 3 months correlation between Philex and RFM is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Philex Mining Corp and RFM Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RFM Corp and Philex Mining 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 Philex Mining Corp 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 Philex Mining i.e., Philex Mining and RFM Corp go up and down completely randomly.

Pair Corralation between Philex Mining and RFM Corp

Assuming the 90 days trading horizon Philex Mining Corp is expected to generate 4.15 times more return on investment than RFM Corp. However, Philex Mining is 4.15 times more volatile than RFM Corp. It trades about 0.38 of its potential returns per unit of risk. RFM Corp is currently generating about 0.17 per unit of risk. If you would invest  276.00  in Philex Mining Corp on December 21, 2024 and sell it today you would earn a total of  439.00  from holding Philex Mining Corp or generate 159.06% return on investment over 90 days.

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

Philex Mining Corp  vs.  RFM Corp

Philex Mining Corp

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Philex Mining Corp are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Philex Mining exhibited solid returns over the last few months and may actually be approaching a breakup point.

RFM Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RFM Corp are ranked lower than 13 (%) 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 April 2025.

Pair Trading with Philex Mining and RFM Corp

The main advantage of trading using opposite Philex Mining and RFM Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Philex Mining 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 Philex Mining Corp 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.