Correlation Between RFM Corp and Semirara Mining

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

By analyzing existing cross correlation between RFM Corp and Semirara Mining Corp, you can compare the effects of market volatilities on RFM Corp and Semirara Mining 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 Semirara Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of RFM Corp and Semirara Mining.

Diversification Opportunities for RFM Corp and Semirara Mining

0.6

Correlation Coefficient

RFM Corp  Semirara Mining

Poor diversification

The 3 months correlation between RFM and Semirara is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding RFM Corp and Semirara Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Semirara Mining Corp 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 Semirara Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Semirara Mining Corp has no effect on the direction of RFM Corp i.e., RFM Corp and Semirara Mining go up and down completely randomly.

Pair Corralation between RFM Corp and Semirara Mining

Assuming the 90 days trading horizon RFM Corp is expected to generate 1.07 times more return on investment than Semirara Mining. However, RFM Corp is 1.07 times more volatile than Semirara Mining Corp. It trades about 0.08 of its potential returns per unit of risk. Semirara Mining Corp is currently generating about 0.08 per unit of risk. If you would invest  366.00  in RFM Corp on September 24, 2024 and sell it today you would earn a total of  23.00  from holding RFM Corp or generate 6.28% return on investment over 90 days.

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

RFM Corp  vs.  Semirara Mining Corp

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 uncertain technical and fundamental indicators, RFM Corp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Semirara Mining Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Semirara Mining Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Semirara Mining is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with RFM Corp and Semirara Mining

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

The idea behind RFM Corp and Semirara Mining 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.