Correlation Between SAF Special and RPCG Public

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

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

Diversification Opportunities for SAF Special and RPCG Public

0.91

Correlation Coefficient

SAF Special  RPCG Public

Almost no diversification

The 3 months correlation between SAF and RPCG is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding SAF Special Steel and RPCG Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RPCG Public and SAF Special 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 SAF Special Steel are associated (or correlated) with RPCG Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RPCG Public has no effect on the direction of SAF Special i.e., SAF Special and RPCG Public go up and down completely randomly.

Pair Corralation between SAF Special and RPCG Public

Assuming the 90 days trading horizon SAF Special Steel is expected to generate 1.07 times more return on investment than RPCG Public. However, SAF Special is 1.07 times more volatile than RPCG Public. It trades about -0.12 of its potential returns per unit of risk. RPCG Public is currently generating about -0.39 per unit of risk. If you would invest  53.00  in SAF Special Steel on October 12, 2024 and sell it today you would lose (4.00) from holding SAF Special Steel or give up 7.55% of portfolio value over 90 days.

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

SAF Special Steel  vs.  RPCG Public

SAF Special Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SAF Special Steel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

RPCG Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RPCG Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with SAF Special and RPCG Public

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

The idea behind SAF Special Steel and RPCG Public 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.