Correlation Between Regional Management and B Riley

Can any of the company-specific risk be diversified away by investing in both Regional Management and B Riley 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 B Riley 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 B Riley Financial, you can compare the effects of market volatilities on Regional Management and B Riley 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 B Riley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Regional Management and B Riley.

Diversification Opportunities for Regional Management and B Riley

-0.29

Correlation Coefficient

Regional Management  B Riley

Very good diversification

The 3 months correlation between Regional and RILYK is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Regional Management Corp and B Riley Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on B Riley Financial 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 B Riley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of B Riley Financial has no effect on the direction of Regional Management i.e., Regional Management and B Riley go up and down completely randomly.

Pair Corralation between Regional Management and B Riley

Allowing for the 90-day total investment horizon Regional Management Corp is expected to under-perform the B Riley. In addition to that, Regional Management is 1.09 times more volatile than B Riley Financial. It trades about -0.06 of its total potential returns per unit of risk. B Riley Financial is currently generating about 0.09 per unit of volatility. If you would invest  1,967  in B Riley Financial on December 28, 2024 and sell it today you would earn a total of  199.00  from holding B Riley Financial or generate 10.12% return on investment over 90 days.

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

Regional Management Corp  vs.  B Riley Financial

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 abnormal 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.

B Riley Financial

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in B Riley Financial are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, B Riley may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Regional Management and B Riley

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

The idea behind Regional Management Corp and B Riley Financial 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.