Correlation Between RCM TECHNOLOGIES and Enbridge

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

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

Diversification Opportunities for RCM TECHNOLOGIES and Enbridge

0.83

Correlation Coefficient

RCM TECHNOLOGIES  Enbridge

Very poor diversification

The 3 months correlation between RCM and Enbridge is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding RCM TECHNOLOGIES and Enbridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enbridge and RCM TECHNOLOGIES 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 RCM TECHNOLOGIES are associated (or correlated) with Enbridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enbridge has no effect on the direction of RCM TECHNOLOGIES i.e., RCM TECHNOLOGIES and Enbridge go up and down completely randomly.

Pair Corralation between RCM TECHNOLOGIES and Enbridge

Assuming the 90 days trading horizon RCM TECHNOLOGIES is expected to generate 3.2 times more return on investment than Enbridge. However, RCM TECHNOLOGIES is 3.2 times more volatile than Enbridge. It trades about 0.05 of its potential returns per unit of risk. Enbridge is currently generating about 0.05 per unit of risk. If you would invest  1,220  in RCM TECHNOLOGIES on October 4, 2024 and sell it today you would earn a total of  940.00  from holding RCM TECHNOLOGIES or generate 77.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.4%
Values	Daily Returns

RCM TECHNOLOGIES  vs.  Enbridge

RCM TECHNOLOGIES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RCM TECHNOLOGIES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, RCM TECHNOLOGIES is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Enbridge

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Enbridge may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with RCM TECHNOLOGIES and Enbridge

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

The idea behind RCM TECHNOLOGIES and Enbridge 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.