Correlation Between RMB Holdings and Afine Investments

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

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

Diversification Opportunities for RMB Holdings and Afine Investments

0.62

Correlation Coefficient

RMB Holdings  Afine Investments

Poor diversification

The 3 months correlation between RMB and Afine is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding RMB Holdings and Afine Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Afine Investments and RMB Holdings 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 Holdings are associated (or correlated) with Afine Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Afine Investments has no effect on the direction of RMB Holdings i.e., RMB Holdings and Afine Investments go up and down completely randomly.

Pair Corralation between RMB Holdings and Afine Investments

Assuming the 90 days trading horizon RMB Holdings is expected to under-perform the Afine Investments. In addition to that, RMB Holdings is 1.68 times more volatile than Afine Investments. It trades about -0.13 of its total potential returns per unit of risk. Afine Investments is currently generating about -0.05 per unit of volatility. If you would invest  40,200  in Afine Investments on December 26, 2024 and sell it today you would lose (1,600) from holding Afine Investments or give up 3.98% of portfolio value over 90 days.

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

RMB Holdings  vs.  Afine Investments

RMB Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days RMB Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Afine Investments

Risk-Adjusted Performance

Very Weak

Over the last 90 days Afine Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Afine Investments is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with RMB Holdings and Afine Investments

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

The idea behind RMB Holdings and Afine 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.