Correlation Between RCM Technologies and Obayashi

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

By analyzing existing cross correlation between RCM Technologies and Obayashi, you can compare the effects of market volatilities on RCM Technologies and Obayashi 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 Obayashi. Check out your portfolio center. Please also check ongoing floating volatility patterns of RCM Technologies and Obayashi.

Diversification Opportunities for RCM Technologies and Obayashi

0.42

Correlation Coefficient

RCM Technologies  Obayashi

Very weak diversification

The 3 months correlation between RCM and Obayashi is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding RCM Technologies and Obayashi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Obayashi 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 Obayashi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Obayashi has no effect on the direction of RCM Technologies i.e., RCM Technologies and Obayashi go up and down completely randomly.

Pair Corralation between RCM Technologies and Obayashi

Given the investment horizon of 90 days RCM Technologies is expected to under-perform the Obayashi. In addition to that, RCM Technologies is 14.88 times more volatile than Obayashi. It trades about -0.23 of its total potential returns per unit of risk. Obayashi is currently generating about -0.13 per unit of volatility. If you would invest  1,320  in Obayashi on December 27, 2024 and sell it today you would lose (20.00) from holding Obayashi or give up 1.52% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

RCM Technologies  vs.  Obayashi

RCM Technologies

Risk-Adjusted Performance

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 abnormal performance in the last few months, the Stock's primary indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Obayashi

Risk-Adjusted Performance

Very Weak

Over the last 90 days Obayashi has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Obayashi is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with RCM Technologies and Obayashi

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

The idea behind RCM Technologies and Obayashi 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.