Correlation Between RFM Corp and Converge Information

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

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

Diversification Opportunities for RFM Corp and Converge Information

-0.48

Correlation Coefficient

RFM Corp  Converge Information

Very good diversification

The 3 months correlation between RFM and Converge is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding RFM Corp and Converge Information Communica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Converge Information and RFM Corp 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 RFM Corp are associated (or correlated) with Converge Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Converge Information has no effect on the direction of RFM Corp i.e., RFM Corp and Converge Information go up and down completely randomly.

Pair Corralation between RFM Corp and Converge Information

Assuming the 90 days trading horizon RFM Corp is expected to under-perform the Converge Information. But the stock apears to be less risky and, when comparing its historical volatility, RFM Corp is 1.74 times less risky than Converge Information. The stock trades about -0.05 of its potential returns per unit of risk. The Converge Information Communications is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,624  in Converge Information Communications on September 24, 2024 and sell it today you would earn a total of  14.00  from holding Converge Information Communications or generate 0.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

RFM Corp  vs.  Converge Information Communica

RFM Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in RFM Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, RFM Corp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Converge Information

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Converge Information Communications has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Converge Information is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with RFM Corp and Converge Information

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

The idea behind RFM Corp and Converge Information Communications 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.