Correlation Between Ralco Agencies and Telsys

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

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

Diversification Opportunities for Ralco Agencies and Telsys

-0.1

Correlation Coefficient

Ralco Agencies  Telsys

Good diversification

The 3 months correlation between Ralco and Telsys is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Ralco Agencies and Telsys in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telsys and Ralco Agencies 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 Ralco Agencies are associated (or correlated) with Telsys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telsys has no effect on the direction of Ralco Agencies i.e., Ralco Agencies and Telsys go up and down completely randomly.

Pair Corralation between Ralco Agencies and Telsys

Assuming the 90 days trading horizon Ralco Agencies is expected to generate 0.6 times more return on investment than Telsys. However, Ralco Agencies is 1.66 times less risky than Telsys. It trades about 0.36 of its potential returns per unit of risk. Telsys is currently generating about -0.02 per unit of risk. If you would invest  316,600  in Ralco Agencies on August 31, 2024 and sell it today you would earn a total of  133,400  from holding Ralco Agencies or generate 42.14% return on investment over 90 days.

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

Ralco Agencies  vs.  Telsys

Ralco Agencies

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Ralco Agencies are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ralco Agencies sustained solid returns over the last few months and may actually be approaching a breakup point.

Telsys

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Ralco Agencies and Telsys

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

The idea behind Ralco Agencies and Telsys 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.