Correlation Between RCM Technologies and Valeura Energy

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

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

Diversification Opportunities for RCM Technologies and Valeura Energy

0.65

Correlation Coefficient

RCM Technologies  Valeura Energy

Poor diversification

The 3 months correlation between RCM and Valeura is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding RCM Technologies and Valeura Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valeura Energy and RCM Technologies 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 RCM Technologies are associated (or correlated) with Valeura Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valeura Energy has no effect on the direction of RCM Technologies i.e., RCM Technologies and Valeura Energy go up and down completely randomly.

Pair Corralation between RCM Technologies and Valeura Energy

Given the investment horizon of 90 days RCM Technologies is expected to generate 3.85 times less return on investment than Valeura Energy. But when comparing it to its historical volatility, RCM Technologies is 1.72 times less risky than Valeura Energy. It trades about 0.06 of its potential returns per unit of risk. Valeura Energy is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  331.00  in Valeura Energy on September 23, 2024 and sell it today you would earn a total of  105.00  from holding Valeura Energy or generate 31.72% return on investment over 90 days.

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

RCM Technologies  vs.  Valeura Energy

RCM Technologies

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in RCM Technologies are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal primary indicators, RCM Technologies may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Valeura Energy

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Valeura Energy are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Valeura Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with RCM Technologies and Valeura Energy

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

The idea behind RCM Technologies and Valeura Energy 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.