Correlation Between RPBio and ICD Co

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

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

Diversification Opportunities for RPBio and ICD Co

0.83

Correlation Coefficient

RPBio  ICD Co

Very poor diversification

The 3 months correlation between RPBio and ICD is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding RPBio Inc and ICD Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ICD Co and RPBio 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 RPBio Inc are associated (or correlated) with ICD Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ICD Co has no effect on the direction of RPBio i.e., RPBio and ICD Co go up and down completely randomly.

Pair Corralation between RPBio and ICD Co

Assuming the 90 days trading horizon RPBio Inc is expected to under-perform the ICD Co. But the stock apears to be less risky and, when comparing its historical volatility, RPBio Inc is 1.04 times less risky than ICD Co. The stock trades about -0.26 of its potential returns per unit of risk. The ICD Co is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  450,500  in ICD Co on September 12, 2024 and sell it today you would lose (25,000) from holding ICD Co or give up 5.55% of portfolio value over 90 days.

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

RPBio Inc  vs.  ICD Co

RPBio Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RPBio Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

ICD Co

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ICD Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with RPBio and ICD Co

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

The idea behind RPBio Inc and ICD 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.