Correlation Between Rainbow Robotics and Formetal

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

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

Diversification Opportunities for Rainbow Robotics and Formetal

-0.45

Correlation Coefficient

Rainbow Robotics  Formetal

Very good diversification

The 3 months correlation between Rainbow and Formetal is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Rainbow Robotics and Formetal Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formetal and Rainbow Robotics 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 Rainbow Robotics are associated (or correlated) with Formetal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formetal has no effect on the direction of Rainbow Robotics i.e., Rainbow Robotics and Formetal go up and down completely randomly.

Pair Corralation between Rainbow Robotics and Formetal

Assuming the 90 days trading horizon Rainbow Robotics is expected to under-perform the Formetal. In addition to that, Rainbow Robotics is 1.27 times more volatile than Formetal Co. It trades about -0.01 of its total potential returns per unit of risk. Formetal Co is currently generating about 0.09 per unit of volatility. If you would invest  267,000  in Formetal Co on September 12, 2024 and sell it today you would earn a total of  33,500  from holding Formetal Co or generate 12.55% return on investment over 90 days.

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

Rainbow Robotics  vs.  Formetal Co

Rainbow Robotics

Risk-Adjusted Performance

0 of 100

Very Weak

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

Formetal

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Formetal Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Formetal sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rainbow Robotics and Formetal

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

The idea behind Rainbow Robotics and Formetal 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.