Correlation Between Radcom and Metalink

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

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

Diversification Opportunities for Radcom and Metalink

0.76

Correlation Coefficient

Radcom  Metalink

Poor diversification

The 3 months correlation between Radcom and Metalink is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Radcom and Metalink in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metalink 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 Metalink. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metalink has no effect on the direction of Radcom i.e., Radcom and Metalink go up and down completely randomly.

Pair Corralation between Radcom and Metalink

Given the investment horizon of 90 days Radcom is expected to generate 19.23 times less return on investment than Metalink. But when comparing it to its historical volatility, Radcom is 16.71 times less risky than Metalink. It trades about 0.03 of its potential returns per unit of risk. Metalink is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  58.00  in Metalink on October 21, 2024 and sell it today you would lose (15.00) from holding Metalink or give up 25.86% of portfolio value over 90 days.

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

Radcom  vs.  Metalink

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.

Metalink

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Metalink are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Metalink is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Radcom and Metalink

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

The idea behind Radcom and Metalink 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.

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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.