Correlation Between RF Acquisition and National Rural

Can any of the company-specific risk be diversified away by investing in both RF Acquisition and National Rural 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 National Rural 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 National Rural Utilities, you can compare the effects of market volatilities on RF Acquisition and National Rural 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 National Rural. Check out your portfolio center. Please also check ongoing floating volatility patterns of RF Acquisition and National Rural.

Diversification Opportunities for RF Acquisition and National Rural

0.01

Correlation Coefficient

RF Acquisition  National Rural

Significant diversification

The 3 months correlation between RFAI and National is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding RF Acquisition Corp and National Rural Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Rural Utilities 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 National Rural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Rural Utilities has no effect on the direction of RF Acquisition i.e., RF Acquisition and National Rural go up and down completely randomly.

Pair Corralation between RF Acquisition and National Rural

Given the investment horizon of 90 days RF Acquisition Corp is expected to generate 0.1 times more return on investment than National Rural. However, RF Acquisition Corp is 9.74 times less risky than National Rural. It trades about 0.27 of its potential returns per unit of risk. National Rural Utilities is currently generating about -0.06 per unit of risk. If you would invest  1,019  in RF Acquisition Corp on December 2, 2024 and sell it today you would earn a total of  13.00  from holding RF Acquisition Corp or generate 1.28% return on investment over 90 days.

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

RF Acquisition Corp  vs.  National Rural Utilities

RF Acquisition Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in RF Acquisition Corp are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, RF Acquisition is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

National Rural Utilities

Risk-Adjusted Performance

Very Weak

Over the last 90 days National Rural Utilities has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, National Rural is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with RF Acquisition and National Rural

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

The idea behind RF Acquisition Corp and National Rural Utilities 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 Transaction History module to view history of all your transactions and understand their impact on performance.