Correlation Between Radcom and Alumina

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

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

Diversification Opportunities for Radcom and Alumina

0.15

Correlation Coefficient

Radcom  Alumina

Average diversification

The 3 months correlation between Radcom and Alumina is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Radcom and Alumina Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alumina Limited 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 Alumina. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alumina Limited has no effect on the direction of Radcom i.e., Radcom and Alumina go up and down completely randomly.

Pair Corralation between Radcom and Alumina

Given the investment horizon of 90 days Radcom is expected to generate 1.54 times less return on investment than Alumina. But when comparing it to its historical volatility, Radcom is 1.2 times less risky than Alumina. It trades about 0.02 of its potential returns per unit of risk. Alumina Limited is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  102.00  in Alumina Limited on October 5, 2024 and sell it today you would earn a total of  9.00  from holding Alumina Limited or generate 8.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	79.35%
Values	Daily Returns

Radcom  vs.  Alumina Limited

Radcom

Risk-Adjusted Performance

7 of 100

Modest

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.

Alumina Limited

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Radcom and Alumina

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

The idea behind Radcom and Alumina Limited 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.