Correlation Between RCM Technologies and Pulse Seismic

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

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

Diversification Opportunities for RCM Technologies and Pulse Seismic

-0.48

Correlation Coefficient

RCM Technologies  Pulse Seismic

Very good diversification

The 3 months correlation between RCM and Pulse is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding RCM Technologies and Pulse Seismic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pulse Seismic 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 Pulse Seismic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pulse Seismic has no effect on the direction of RCM Technologies i.e., RCM Technologies and Pulse Seismic go up and down completely randomly.

Pair Corralation between RCM Technologies and Pulse Seismic

Given the investment horizon of 90 days RCM Technologies is expected to generate 0.94 times more return on investment than Pulse Seismic. However, RCM Technologies is 1.06 times less risky than Pulse Seismic. It trades about 0.1 of its potential returns per unit of risk. Pulse Seismic is currently generating about -0.03 per unit of risk. If you would invest  2,028  in RCM Technologies on September 29, 2024 and sell it today you would earn a total of  289.00  from holding RCM Technologies or generate 14.25% return on investment over 90 days.

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

RCM Technologies  vs.  Pulse Seismic

RCM Technologies

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RCM Technologies are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal primary indicators, RCM Technologies unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pulse Seismic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pulse Seismic has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Pulse Seismic 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 Pulse Seismic

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

The idea behind RCM Technologies and Pulse Seismic 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.