Correlation Between Raytech Holding and Timken

Can any of the company-specific risk be diversified away by investing in both Raytech Holding and Timken 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 Timken 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 Timken Company, you can compare the effects of market volatilities on Raytech Holding and Timken 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 Timken. Check out your portfolio center. Please also check ongoing floating volatility patterns of Raytech Holding and Timken.

Diversification Opportunities for Raytech Holding and Timken

-0.29

Correlation Coefficient

Raytech Holding  Timken

Very good diversification

The 3 months correlation between Raytech and Timken is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Raytech Holding Limited and Timken Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Timken Company 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 Timken. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Timken Company has no effect on the direction of Raytech Holding i.e., Raytech Holding and Timken go up and down completely randomly.

Pair Corralation between Raytech Holding and Timken

Considering the 90-day investment horizon Raytech Holding Limited is expected to generate 8.28 times more return on investment than Timken. However, Raytech Holding is 8.28 times more volatile than Timken Company. It trades about 0.08 of its potential returns per unit of risk. Timken Company is currently generating about 0.04 per unit of risk. If you would invest  144.00  in Raytech Holding Limited on December 27, 2024 and sell it today you would earn a total of  43.00  from holding Raytech Holding Limited or generate 29.86% 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.  Timken Company

Raytech Holding

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Raytech Holding Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Raytech Holding showed solid returns over the last few months and may actually be approaching a breakup point.

Timken Company

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Timken Company are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward-looking signals, Timken is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Raytech Holding and Timken

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

The idea behind Raytech Holding Limited and Timken Company 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..