Correlation Between Radcom and Caspian Services

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

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

Diversification Opportunities for Radcom and Caspian Services

0.27

Correlation Coefficient

Radcom  Caspian Services

Modest diversification

The 3 months correlation between Radcom and Caspian is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Radcom and Caspian Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caspian Services 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 Caspian Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caspian Services has no effect on the direction of Radcom i.e., Radcom and Caspian Services go up and down completely randomly.

Pair Corralation between Radcom and Caspian Services

Given the investment horizon of 90 days Radcom is expected to generate 20.15 times less return on investment than Caspian Services. But when comparing it to its historical volatility, Radcom is 17.65 times less risky than Caspian Services. It trades about 0.05 of its potential returns per unit of risk. Caspian Services is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  0.01  in Caspian Services on October 24, 2024 and sell it today you would earn a total of  0.39  from holding Caspian Services or generate 3900.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.24%
Values	Daily Returns

Radcom  vs.  Caspian Services

Radcom

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Radcom are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent fundamental indicators, Radcom displayed solid returns over the last few months and may actually be approaching a breakup point.

Caspian Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Caspian Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Caspian Services is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Radcom and Caspian Services

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

The idea behind Radcom and Caspian Services 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.