Correlation Between Regional Management and Distoken Acquisition

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

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

Diversification Opportunities for Regional Management and Distoken Acquisition

0.44

Correlation Coefficient

Regional Management  Distoken Acquisition

Very weak diversification

The 3 months correlation between Regional and Distoken is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Regional Management Corp and Distoken Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Distoken Acquisition and Regional Management 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 Regional Management Corp are associated (or correlated) with Distoken Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Distoken Acquisition has no effect on the direction of Regional Management i.e., Regional Management and Distoken Acquisition go up and down completely randomly.

Pair Corralation between Regional Management and Distoken Acquisition

Allowing for the 90-day total investment horizon Regional Management Corp is expected to under-perform the Distoken Acquisition. In addition to that, Regional Management is 1.83 times more volatile than Distoken Acquisition. It trades about -0.06 of its total potential returns per unit of risk. Distoken Acquisition is currently generating about -0.01 per unit of volatility. If you would invest  1,120  in Distoken Acquisition on December 30, 2024 and sell it today you would lose (9.00) from holding Distoken Acquisition or give up 0.8% of portfolio value over 90 days.

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

Regional Management Corp  vs.  Distoken Acquisition

Regional Management Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Regional Management Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Distoken Acquisition

Risk-Adjusted Performance

Very Weak

Over the last 90 days Distoken Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Distoken Acquisition is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Regional Management and Distoken Acquisition

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

The idea behind Regional Management Corp and Distoken Acquisition 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.