Correlation Between RFM Corp and Allhome Corp

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

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

Diversification Opportunities for RFM Corp and Allhome Corp

-0.76

Correlation Coefficient

RFM Corp  Allhome Corp

Pay attention - limited upside

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

Pair Corralation between RFM Corp and Allhome Corp

Assuming the 90 days trading horizon RFM Corp is expected to generate 0.67 times more return on investment than Allhome Corp. However, RFM Corp is 1.48 times less risky than Allhome Corp. It trades about 0.04 of its potential returns per unit of risk. Allhome Corp is currently generating about -0.08 per unit of risk. If you would invest  314.00  in RFM Corp on October 13, 2024 and sell it today you would earn a total of  82.00  from holding RFM Corp or generate 26.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	97.71%
Values	Daily Returns

RFM Corp  vs.  Allhome Corp

RFM Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RFM Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, RFM Corp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Allhome Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Allhome Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with RFM Corp and Allhome Corp

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

The idea behind RFM Corp and Allhome Corp 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.