Correlation Between Radware and Payfare

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

By analyzing existing cross correlation between Radware and Payfare, you can compare the effects of market volatilities on Radware and Payfare 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 Radware with a short position of Payfare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Radware and Payfare.

Diversification Opportunities for Radware and Payfare

0.25

Correlation Coefficient

Radware  Payfare

Modest diversification

The 3 months correlation between Radware and Payfare is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Radware and Payfare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Payfare and Radware 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 Radware are associated (or correlated) with Payfare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Payfare has no effect on the direction of Radware i.e., Radware and Payfare go up and down completely randomly.

Pair Corralation between Radware and Payfare

Given the investment horizon of 90 days Radware is expected to under-perform the Payfare. In addition to that, Radware is 1.95 times more volatile than Payfare. It trades about -0.02 of its total potential returns per unit of risk. Payfare is currently generating about 0.09 per unit of volatility. If you would invest  266.00  in Payfare on December 30, 2024 and sell it today you would earn a total of  10.00  from holding Payfare or generate 3.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	70.97%
Values	Daily Returns

Radware  vs.  Payfare

Radware

Risk-Adjusted Performance

Very Weak

Over the last 90 days Radware has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Radware is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Payfare

Risk-Adjusted Performance

OK

Over the last 90 days Payfare has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Payfare is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Radware and Payfare

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

The idea behind Radware and Payfare 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.