Correlation Between Rmb Mendon and Eafe Choice

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

By analyzing existing cross correlation between Rmb Mendon Financial and The Eafe Choice, you can compare the effects of market volatilities on Rmb Mendon and Eafe Choice 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 Rmb Mendon with a short position of Eafe Choice. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rmb Mendon and Eafe Choice.

Diversification Opportunities for Rmb Mendon and Eafe Choice

-0.39

Correlation Coefficient

Rmb Mendon  Eafe Choice

Very good diversification

The 3 months correlation between Rmb and Eafe is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Rmb Mendon Financial and The Eafe Choice in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eafe Choice and Rmb Mendon 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 Rmb Mendon Financial are associated (or correlated) with Eafe Choice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eafe Choice has no effect on the direction of Rmb Mendon i.e., Rmb Mendon and Eafe Choice go up and down completely randomly.

Pair Corralation between Rmb Mendon and Eafe Choice

Assuming the 90 days horizon Rmb Mendon Financial is expected to under-perform the Eafe Choice. But the mutual fund apears to be less risky and, when comparing its historical volatility, Rmb Mendon Financial is 1.11 times less risky than Eafe Choice. The mutual fund trades about -0.23 of its potential returns per unit of risk. The The Eafe Choice is currently generating about -0.15 of returns per unit of risk over similar time horizon. If you would invest  1,534  in The Eafe Choice on October 10, 2024 and sell it today you would lose (115.00) from holding The Eafe Choice or give up 7.5% of portfolio value over 90 days.

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

Rmb Mendon Financial  vs.  The Eafe Choice

Rmb Mendon Financial

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rmb Mendon Financial are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Rmb Mendon may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Eafe Choice

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Eafe Choice has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Rmb Mendon and Eafe Choice

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

The idea behind Rmb Mendon Financial and The Eafe Choice 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.