Correlation Between RMB Holdings and Transpaco

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

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

Diversification Opportunities for RMB Holdings and Transpaco

-0.17

Correlation Coefficient

RMB Holdings  Transpaco

Good diversification

The 3 months correlation between RMB and Transpaco is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding RMB Holdings and Transpaco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transpaco 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 Transpaco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transpaco has no effect on the direction of RMB Holdings i.e., RMB Holdings and Transpaco go up and down completely randomly.

Pair Corralation between RMB Holdings and Transpaco

Assuming the 90 days trading horizon RMB Holdings is expected to generate 10.61 times less return on investment than Transpaco. But when comparing it to its historical volatility, RMB Holdings is 1.02 times less risky than Transpaco. It trades about 0.0 of its potential returns per unit of risk. Transpaco is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  293,000  in Transpaco on October 5, 2024 and sell it today you would earn a total of  81,900  from holding Transpaco or generate 27.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.35%
Values	Daily Returns

RMB Holdings  vs.  Transpaco

RMB Holdings

Risk-Adjusted Performance

4 of 100

Modest

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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Transpaco

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Transpaco 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, Transpaco 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 Transpaco

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

The idea behind RMB Holdings and Transpaco 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.