Correlation Between Radcom and KDDI Corp

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

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

Diversification Opportunities for Radcom and KDDI Corp

-0.18

Correlation Coefficient

Radcom  KDDI Corp

Good diversification

The 3 months correlation between Radcom and KDDI is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Radcom and KDDI Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KDDI Corp 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 KDDI Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KDDI Corp has no effect on the direction of Radcom i.e., Radcom and KDDI Corp go up and down completely randomly.

Pair Corralation between Radcom and KDDI Corp

Given the investment horizon of 90 days Radcom is expected to generate 1.17 times less return on investment than KDDI Corp. But when comparing it to its historical volatility, Radcom is 1.48 times less risky than KDDI Corp. It trades about 0.04 of its potential returns per unit of risk. KDDI Corp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,852  in KDDI Corp on October 22, 2024 and sell it today you would earn a total of  342.00  from holding KDDI Corp or generate 11.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	74.4%
Values	Daily Returns

Radcom  vs.  KDDI Corp

Radcom

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Radcom are ranked lower than 10 (%) 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.

KDDI Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KDDI Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward indicators, KDDI Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Radcom and KDDI Corp

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

The idea behind Radcom and KDDI Corp 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.