Correlation Between Radcom and Arrow Financial

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

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

Diversification Opportunities for Radcom and Arrow Financial

0.7

Correlation Coefficient

Radcom  Arrow Financial

Poor diversification

The 3 months correlation between Radcom and Arrow is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Radcom and Arrow Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Financial and Radcom 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 Radcom are associated (or correlated) with Arrow Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrow Financial has no effect on the direction of Radcom i.e., Radcom and Arrow Financial go up and down completely randomly.

Pair Corralation between Radcom and Arrow Financial

Given the investment horizon of 90 days Radcom is expected to generate 1.48 times more return on investment than Arrow Financial. However, Radcom is 1.48 times more volatile than Arrow Financial. It trades about 0.1 of its potential returns per unit of risk. Arrow Financial is currently generating about 0.06 per unit of risk. If you would invest  981.00  in Radcom on September 18, 2024 and sell it today you would earn a total of  200.00  from holding Radcom or generate 20.39% return on investment over 90 days.

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

Radcom  vs.  Arrow Financial

Radcom

Risk-Adjusted Performance

7 of 100

OK

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

Arrow Financial

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Arrow Financial are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Arrow Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Radcom and Arrow Financial

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

The idea behind Radcom and Arrow Financial 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.

Check out your portfolio center.

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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.