Correlation Between DB Financial and RFTech

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

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

Diversification Opportunities for DB Financial and RFTech

-0.1

Correlation Coefficient

DB Financial  RFTech

Good diversification

The 3 months correlation between 016610 and RFTech is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding DB Financial Investment and RFTech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RFTech and DB Financial 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 DB Financial Investment are associated (or correlated) with RFTech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RFTech has no effect on the direction of DB Financial i.e., DB Financial and RFTech go up and down completely randomly.

Pair Corralation between DB Financial and RFTech

Assuming the 90 days trading horizon DB Financial Investment is expected to under-perform the RFTech. But the stock apears to be less risky and, when comparing its historical volatility, DB Financial Investment is 1.11 times less risky than RFTech. The stock trades about -0.08 of its potential returns per unit of risk. The RFTech Co is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  316,000  in RFTech Co on September 23, 2024 and sell it today you would earn a total of  69,500  from holding RFTech Co or generate 21.99% return on investment over 90 days.

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

DB Financial Investment  vs.  RFTech Co

DB Financial Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DB Financial Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

RFTech

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RFTech Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, RFTech sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DB Financial and RFTech

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

The idea behind DB Financial Investment and RFTech Co 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.