Correlation Between RF Acquisition and Transportadora

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

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

Diversification Opportunities for RF Acquisition and Transportadora

0.27

Correlation Coefficient

RF Acquisition  Transportadora

Modest diversification

The 3 months correlation between RFACR and Transportadora is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding RF Acquisition Corp and Transportadora de Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transportadora de Gas and RF Acquisition 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 RF Acquisition Corp are associated (or correlated) with Transportadora. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transportadora de Gas has no effect on the direction of RF Acquisition i.e., RF Acquisition and Transportadora go up and down completely randomly.

Pair Corralation between RF Acquisition and Transportadora

Assuming the 90 days horizon RF Acquisition Corp is expected to generate 7.87 times more return on investment than Transportadora. However, RF Acquisition is 7.87 times more volatile than Transportadora de Gas. It trades about 0.26 of its potential returns per unit of risk. Transportadora de Gas is currently generating about 0.15 per unit of risk. If you would invest  14.00  in RF Acquisition Corp on October 12, 2024 and sell it today you would earn a total of  11.00  from holding RF Acquisition Corp or generate 78.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	80.0%
Values	Daily Returns

RF Acquisition Corp  vs.  Transportadora de Gas

RF Acquisition Corp

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in RF Acquisition Corp are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain fundamental indicators, RF Acquisition reported solid returns over the last few months and may actually be approaching a breakup point.

Transportadora de Gas

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Transportadora de Gas are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Transportadora unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with RF Acquisition and Transportadora

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

The idea behind RF Acquisition Corp and Transportadora de Gas 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.