Correlation Between Radcom and Arconic

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

By analyzing existing cross correlation between Radcom and Arconic 59 percent, you can compare the effects of market volatilities on Radcom and Arconic 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 Arconic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Radcom and Arconic.

Diversification Opportunities for Radcom and Arconic

-0.69

Correlation Coefficient

Radcom  Arconic

Excellent diversification

The 3 months correlation between Radcom and Arconic is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Radcom and Arconic 59 percent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arconic 59 percent 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 Arconic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arconic 59 percent has no effect on the direction of Radcom i.e., Radcom and Arconic go up and down completely randomly.

Pair Corralation between Radcom and Arconic

Given the investment horizon of 90 days Radcom is expected to generate 10.2 times more return on investment than Arconic. However, Radcom is 10.2 times more volatile than Arconic 59 percent. It trades about 0.15 of its potential returns per unit of risk. Arconic 59 percent is currently generating about -0.01 per unit of risk. If you would invest  1,050  in Radcom on September 12, 2024 and sell it today you would earn a total of  150.00  from holding Radcom or generate 14.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Radcom  vs.  Arconic 59 percent

Radcom

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Radcom are ranked lower than 9 (%) 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.

Arconic 59 percent

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arconic 59 percent has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Arconic is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Radcom and Arconic

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

The idea behind Radcom and Arconic 59 percent 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.