Correlation Between Radcom and Grindrod

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

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

Diversification Opportunities for Radcom and Grindrod

0.51

Correlation Coefficient

Radcom  Grindrod

Very weak diversification

The 3 months correlation between Radcom and Grindrod is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Radcom and Grindrod Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grindrod ADR and Radcom 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 Radcom are associated (or correlated) with Grindrod. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grindrod ADR has no effect on the direction of Radcom i.e., Radcom and Grindrod go up and down completely randomly.

Pair Corralation between Radcom and Grindrod

Given the investment horizon of 90 days Radcom is expected to generate 39.19 times more return on investment than Grindrod. However, Radcom is 39.19 times more volatile than Grindrod Ltd ADR. It trades about 0.12 of its potential returns per unit of risk. Grindrod Ltd ADR is currently generating about 0.13 per unit of risk. If you would invest  944.00  in Radcom on September 12, 2024 and sell it today you would earn a total of  246.00  from holding Radcom or generate 26.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Radcom  vs.  Grindrod Ltd ADR

Radcom

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Radcom are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Radcom displayed solid returns over the last few months and may actually be approaching a breakup point.

Grindrod ADR

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Grindrod Ltd ADR are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, Grindrod is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Radcom and Grindrod

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

The idea behind Radcom and Grindrod Ltd ADR 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.