Correlation Between RLF AgTech and Platinum Asia

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

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

Diversification Opportunities for RLF AgTech and Platinum Asia

0.65

Correlation Coefficient

RLF AgTech  Platinum Asia

Poor diversification

The 3 months correlation between RLF and Platinum is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding RLF AgTech and Platinum Asia Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Platinum Asia Investments and RLF AgTech 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 RLF AgTech are associated (or correlated) with Platinum Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Platinum Asia Investments has no effect on the direction of RLF AgTech i.e., RLF AgTech and Platinum Asia go up and down completely randomly.

Pair Corralation between RLF AgTech and Platinum Asia

Assuming the 90 days trading horizon RLF AgTech is expected to generate 2.1 times more return on investment than Platinum Asia. However, RLF AgTech is 2.1 times more volatile than Platinum Asia Investments. It trades about 0.06 of its potential returns per unit of risk. Platinum Asia Investments is currently generating about 0.11 per unit of risk. If you would invest  4.50  in RLF AgTech on September 14, 2024 and sell it today you would earn a total of  0.40  from holding RLF AgTech or generate 8.89% return on investment over 90 days.

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

RLF AgTech  vs.  Platinum Asia Investments

RLF AgTech

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in RLF AgTech are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, RLF AgTech may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Platinum Asia Investments

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Platinum Asia Investments are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward indicators, Platinum Asia may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with RLF AgTech and Platinum Asia

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

The idea behind RLF AgTech and Platinum Asia Investments 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.