Correlation Between Raytech Holding and Globalfoundries

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

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

Diversification Opportunities for Raytech Holding and Globalfoundries

-0.33

Correlation Coefficient

Raytech Holding  Globalfoundries

Very good diversification

The 3 months correlation between Raytech and Globalfoundries is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Raytech Holding Limited and Globalfoundries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globalfoundries and Raytech Holding 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 Raytech Holding Limited are associated (or correlated) with Globalfoundries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globalfoundries has no effect on the direction of Raytech Holding i.e., Raytech Holding and Globalfoundries go up and down completely randomly.

Pair Corralation between Raytech Holding and Globalfoundries

Considering the 90-day investment horizon Raytech Holding Limited is expected to under-perform the Globalfoundries. In addition to that, Raytech Holding is 1.4 times more volatile than Globalfoundries. It trades about -0.05 of its total potential returns per unit of risk. Globalfoundries is currently generating about 0.06 per unit of volatility. If you would invest  3,975  in Globalfoundries on September 13, 2024 and sell it today you would earn a total of  410.00  from holding Globalfoundries or generate 10.31% return on investment over 90 days.

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

Raytech Holding Limited  vs.  Globalfoundries

Raytech Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Raytech Holding Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Globalfoundries

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Globalfoundries are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent technical and fundamental indicators, Globalfoundries unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Raytech Holding and Globalfoundries

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

The idea behind Raytech Holding Limited and Globalfoundries 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.