Correlation Between Rand Capital and Freedom Holding

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

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

Diversification Opportunities for Rand Capital and Freedom Holding

0.68

Correlation Coefficient

Rand Capital  Freedom Holding

Poor diversification

The 3 months correlation between Rand and Freedom is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Rand Capital Corp and Freedom Holding Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freedom Holding Corp and Rand Capital 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 Rand Capital Corp are associated (or correlated) with Freedom Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freedom Holding Corp has no effect on the direction of Rand Capital i.e., Rand Capital and Freedom Holding go up and down completely randomly.

Pair Corralation between Rand Capital and Freedom Holding

Given the investment horizon of 90 days Rand Capital Corp is expected to generate 1.68 times more return on investment than Freedom Holding. However, Rand Capital is 1.68 times more volatile than Freedom Holding Corp. It trades about 0.05 of its potential returns per unit of risk. Freedom Holding Corp is currently generating about 0.07 per unit of risk. If you would invest  984.00  in Rand Capital Corp on September 28, 2024 and sell it today you would earn a total of  831.00  from holding Rand Capital Corp or generate 84.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	88.31%
Values	Daily Returns

Rand Capital Corp  vs.  Freedom Holding Corp

Rand Capital Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rand Capital Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Rand Capital exhibited solid returns over the last few months and may actually be approaching a breakup point.

Freedom Holding Corp

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Freedom Holding Corp are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical indicators, Freedom Holding exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rand Capital and Freedom Holding

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

The idea behind Rand Capital Corp and Freedom Holding 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .