Correlation Between RMB Holdings and Italtile

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

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

Diversification Opportunities for RMB Holdings and Italtile

0.48

Correlation Coefficient

RMB Holdings  Italtile

Very weak diversification

The 3 months correlation between RMB and Italtile is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding RMB Holdings and Italtile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Italtile 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 Italtile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Italtile has no effect on the direction of RMB Holdings i.e., RMB Holdings and Italtile go up and down completely randomly.

Pair Corralation between RMB Holdings and Italtile

Assuming the 90 days trading horizon RMB Holdings is expected to generate 2.88 times less return on investment than Italtile. But when comparing it to its historical volatility, RMB Holdings is 1.07 times less risky than Italtile. It trades about 0.04 of its potential returns per unit of risk. Italtile is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  103,800  in Italtile on October 13, 2024 and sell it today you would earn a total of  30,100  from holding Italtile or generate 29.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.31%
Values	Daily Returns

RMB Holdings  vs.  Italtile

RMB Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in RMB Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, RMB Holdings is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Italtile

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Italtile are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Italtile 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 Italtile

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

The idea behind RMB Holdings and Italtile 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.