Correlation Between RCM Technologies and Rohm Co

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

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

Diversification Opportunities for RCM Technologies and Rohm Co

-0.64

Correlation Coefficient

RCM Technologies  Rohm Co

Excellent diversification

The 3 months correlation between RCM and Rohm is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding RCM Technologies and Rohm Co Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rohm Co 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 Rohm Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rohm Co has no effect on the direction of RCM Technologies i.e., RCM Technologies and Rohm Co go up and down completely randomly.

Pair Corralation between RCM Technologies and Rohm Co

Given the investment horizon of 90 days RCM Technologies is expected to generate 1.46 times more return on investment than Rohm Co. However, RCM Technologies is 1.46 times more volatile than Rohm Co Ltd. It trades about 0.04 of its potential returns per unit of risk. Rohm Co Ltd is currently generating about -0.04 per unit of risk. If you would invest  2,152  in RCM Technologies on September 23, 2024 and sell it today you would earn a total of  27.00  from holding RCM Technologies or generate 1.25% return on investment over 90 days.

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

RCM Technologies  vs.  Rohm Co Ltd

RCM Technologies

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in RCM Technologies are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal primary indicators, RCM Technologies may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Rohm Co

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rohm Co Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's fundamental 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.

Pair Trading with RCM Technologies and Rohm Co

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

The idea behind RCM Technologies and Rohm Co Ltd 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.