Correlation Between Raytech Holding and Abercrombie Fitch

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

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

Diversification Opportunities for Raytech Holding and Abercrombie Fitch

-0.36

Correlation Coefficient

Raytech Holding  Abercrombie Fitch

Very good diversification

The 3 months correlation between Raytech and Abercrombie is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Raytech Holding Limited and Abercrombie Fitch in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Abercrombie Fitch and Raytech Holding 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 Raytech Holding Limited are associated (or correlated) with Abercrombie Fitch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Abercrombie Fitch has no effect on the direction of Raytech Holding i.e., Raytech Holding and Abercrombie Fitch go up and down completely randomly.

Pair Corralation between Raytech Holding and Abercrombie Fitch

Considering the 90-day investment horizon Raytech Holding Limited is expected to under-perform the Abercrombie Fitch. In addition to that, Raytech Holding is 1.77 times more volatile than Abercrombie Fitch. It trades about -0.09 of its total potential returns per unit of risk. Abercrombie Fitch is currently generating about 0.02 per unit of volatility. If you would invest  14,757  in Abercrombie Fitch on August 30, 2024 and sell it today you would earn a total of  99.00  from holding Abercrombie Fitch or generate 0.67% return on investment over 90 days.

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

Raytech Holding Limited  vs.  Abercrombie Fitch

Raytech Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Raytech Holding Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Abercrombie Fitch

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Abercrombie Fitch are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Abercrombie Fitch is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Raytech Holding and Abercrombie Fitch

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

The idea behind Raytech Holding Limited and Abercrombie Fitch 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.

Check out your portfolio center.

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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.