Correlation Between Radcom and CERo Therapeutics

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

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

Diversification Opportunities for Radcom and CERo Therapeutics

0.55

Correlation Coefficient

Radcom  CERo Therapeutics

Very weak diversification

The 3 months correlation between Radcom and CERo is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Radcom and CERo Therapeutics Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CERo Therapeutics 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 CERo Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CERo Therapeutics has no effect on the direction of Radcom i.e., Radcom and CERo Therapeutics go up and down completely randomly.

Pair Corralation between Radcom and CERo Therapeutics

Given the investment horizon of 90 days Radcom is expected to generate 1.17 times less return on investment than CERo Therapeutics. But when comparing it to its historical volatility, Radcom is 9.0 times less risky than CERo Therapeutics. It trades about 0.12 of its potential returns per unit of risk. CERo Therapeutics Holdings is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1.28  in CERo Therapeutics Holdings on October 8, 2024 and sell it today you would lose (0.38) from holding CERo Therapeutics Holdings or give up 29.69% of portfolio value over 90 days.

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

Radcom  vs.  CERo Therapeutics Holdings

Radcom

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Radcom are ranked lower than 6 (%) 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.

CERo Therapeutics

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CERo Therapeutics Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, CERo Therapeutics showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Radcom and CERo Therapeutics

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

The idea behind Radcom and CERo Therapeutics Holdings 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.