Correlation Between Radcom and Employers Holdings

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

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

Diversification Opportunities for Radcom and Employers Holdings

-0.42

Correlation Coefficient

Radcom  Employers Holdings

Very good diversification

The 3 months correlation between Radcom and Employers is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Radcom and Employers Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Employers Holdings 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 Employers Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Employers Holdings has no effect on the direction of Radcom i.e., Radcom and Employers Holdings go up and down completely randomly.

Pair Corralation between Radcom and Employers Holdings

Given the investment horizon of 90 days Radcom is expected to generate 3.3 times more return on investment than Employers Holdings. However, Radcom is 3.3 times more volatile than Employers Holdings. It trades about 0.02 of its potential returns per unit of risk. Employers Holdings is currently generating about -0.01 per unit of risk. If you would invest  1,204  in Radcom on December 26, 2024 and sell it today you would earn a total of  16.00  from holding Radcom or generate 1.33% return on investment over 90 days.

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

Radcom  vs.  Employers Holdings

Radcom

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Radcom are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Radcom is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Employers Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Employers Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, Employers Holdings 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 Employers Holdings

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

The idea behind Radcom and Employers 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.