Correlation Between RMR and Rafael Holdings

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

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

Diversification Opportunities for RMR and Rafael Holdings

-0.31

Correlation Coefficient

RMR  Rafael Holdings

Very good diversification

The 3 months correlation between RMR and Rafael is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding RMR Group and Rafael Holdings Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rafael Holdings Class and RMR 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 RMR Group are associated (or correlated) with Rafael Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rafael Holdings Class has no effect on the direction of RMR i.e., RMR and Rafael Holdings go up and down completely randomly.

Pair Corralation between RMR and Rafael Holdings

Considering the 90-day investment horizon RMR Group is expected to under-perform the Rafael Holdings. But the stock apears to be less risky and, when comparing its historical volatility, RMR Group is 2.42 times less risky than Rafael Holdings. The stock trades about -0.22 of its potential returns per unit of risk. The Rafael Holdings Class is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  162.00  in Rafael Holdings Class on December 26, 2024 and sell it today you would earn a total of  48.00  from holding Rafael Holdings Class or generate 29.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

RMR Group  vs.  Rafael Holdings Class

RMR Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days RMR Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's primary indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Rafael Holdings Class

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rafael Holdings Class are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating technical and fundamental indicators, Rafael Holdings disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with RMR and Rafael Holdings

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

The idea behind RMR Group and Rafael Holdings Class 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.