Correlation Between National Reinsurance and RFM Corp

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

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

Diversification Opportunities for National Reinsurance and RFM Corp

-0.57

Correlation Coefficient

National Reinsurance  RFM Corp

Excellent diversification

The 3 months correlation between National and RFM is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding National Reinsurance and RFM Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RFM Corp and National Reinsurance 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 National Reinsurance are associated (or correlated) with RFM Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RFM Corp has no effect on the direction of National Reinsurance i.e., National Reinsurance and RFM Corp go up and down completely randomly.

Pair Corralation between National Reinsurance and RFM Corp

Assuming the 90 days trading horizon National Reinsurance is expected to generate 3.97 times more return on investment than RFM Corp. However, National Reinsurance is 3.97 times more volatile than RFM Corp. It trades about 0.04 of its potential returns per unit of risk. RFM Corp is currently generating about 0.04 per unit of risk. If you would invest  62.00  in National Reinsurance on September 25, 2024 and sell it today you would earn a total of  4.00  from holding National Reinsurance or generate 6.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	61.31%
Values	Daily Returns

National Reinsurance  vs.  RFM Corp

National Reinsurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Reinsurance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, National Reinsurance is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

RFM Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in RFM Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, RFM Corp is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with National Reinsurance and RFM Corp

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

The idea behind National Reinsurance and RFM Corp 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.