Correlation Between RMB Holdings and S A P

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

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

Diversification Opportunities for RMB Holdings and S A P

-0.29

Correlation Coefficient

RMB Holdings  S A P

Very good diversification

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

Pair Corralation between RMB Holdings and S A P

Assuming the 90 days trading horizon RMB Holdings is expected to generate 2.48 times less return on investment than S A P. In addition to that, RMB Holdings is 1.29 times more volatile than Sappi. It trades about 0.0 of its total potential returns per unit of risk. Sappi is currently generating about 0.01 per unit of volatility. If you would invest  514,200  in Sappi on October 12, 2024 and sell it today you would lose (23,300) from holding Sappi or give up 4.53% of portfolio value over 90 days.

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

RMB Holdings  vs.  Sappi

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.

Sappi

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with RMB Holdings and S A P

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

The idea behind RMB Holdings and Sappi 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.