Correlation Between RSR and Maker

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

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

Diversification Opportunities for RSR and Maker

0.33

Correlation Coefficient

RSR  Maker

Weak diversification

The 3 months correlation between RSR and Maker is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding RSR and Maker in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maker and RSR 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 RSR are associated (or correlated) with Maker. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maker has no effect on the direction of RSR i.e., RSR and Maker go up and down completely randomly.

Pair Corralation between RSR and Maker

Assuming the 90 days trading horizon RSR is expected to under-perform the Maker. In addition to that, RSR is 1.24 times more volatile than Maker. It trades about -0.09 of its total potential returns per unit of risk. Maker is currently generating about 0.02 per unit of volatility. If you would invest  149,147  in Maker on December 28, 2024 and sell it today you would lose (5,272) from holding Maker or give up 3.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

RSR  vs.  Maker

RSR

Risk-Adjusted Performance

Very Weak

Over the last 90 days RSR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for RSR shareholders.

Maker

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Maker are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Maker may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with RSR and Maker

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

The idea behind RSR and Maker 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.