Correlation Between Steven Madden and Raytech Holding

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

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

Diversification Opportunities for Steven Madden and Raytech Holding

-0.02

Correlation Coefficient

Steven Madden  Raytech Holding

Good diversification

The 3 months correlation between Steven and Raytech is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Steven Madden and Raytech Holding Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raytech Holding and Steven Madden 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 Steven Madden are associated (or correlated) with Raytech Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raytech Holding has no effect on the direction of Steven Madden i.e., Steven Madden and Raytech Holding go up and down completely randomly.

Pair Corralation between Steven Madden and Raytech Holding

Given the investment horizon of 90 days Steven Madden is expected to under-perform the Raytech Holding. But the stock apears to be less risky and, when comparing its historical volatility, Steven Madden is 5.55 times less risky than Raytech Holding. The stock trades about -0.27 of its potential returns per unit of risk. The Raytech Holding Limited is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  138.00  in Raytech Holding Limited on December 28, 2024 and sell it today you would earn a total of  66.00  from holding Raytech Holding Limited or generate 47.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Steven Madden  vs.  Raytech Holding Limited

Steven Madden

Risk-Adjusted Performance

Very Weak

Over the last 90 days Steven Madden has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Raytech Holding

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Raytech Holding Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Raytech Holding showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Steven Madden and Raytech Holding

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

The idea behind Steven Madden and Raytech Holding Limited 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.