Correlation Between RiverNorth Specialty and HYB

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

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

Diversification Opportunities for RiverNorth Specialty and HYB

0.21

Correlation Coefficient

RiverNorth Specialty  HYB

Modest diversification

The 3 months correlation between RiverNorth and HYB is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding RiverNorth Specialty Finance and HYB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HYB and RiverNorth Specialty 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 RiverNorth Specialty Finance are associated (or correlated) with HYB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HYB has no effect on the direction of RiverNorth Specialty i.e., RiverNorth Specialty and HYB go up and down completely randomly.

Pair Corralation between RiverNorth Specialty and HYB

Considering the 90-day investment horizon RiverNorth Specialty Finance is expected to generate 1.53 times more return on investment than HYB. However, RiverNorth Specialty is 1.53 times more volatile than HYB. It trades about 0.08 of its potential returns per unit of risk. HYB is currently generating about 0.08 per unit of risk. If you would invest  1,478  in RiverNorth Specialty Finance on December 28, 2024 and sell it today you would earn a total of  37.00  from holding RiverNorth Specialty Finance or generate 2.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	61.67%
Values	Daily Returns

RiverNorth Specialty Finance  vs.  HYB

RiverNorth Specialty

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in RiverNorth Specialty Finance are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, RiverNorth Specialty is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

HYB

Risk-Adjusted Performance

Modest

Over the last 90 days HYB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, HYB is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with RiverNorth Specialty and HYB

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

The idea behind RiverNorth Specialty Finance and HYB 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.

Check out your portfolio center.

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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .