Correlation Between Regional Management and NorthView Acquisition

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

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

Diversification Opportunities for Regional Management and NorthView Acquisition

-0.32

Correlation Coefficient

Regional Management  NorthView Acquisition

Very good diversification

The 3 months correlation between Regional and NorthView is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Regional Management Corp and NorthView Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NorthView Acquisition and Regional Management 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 Regional Management Corp are associated (or correlated) with NorthView Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NorthView Acquisition has no effect on the direction of Regional Management i.e., Regional Management and NorthView Acquisition go up and down completely randomly.

Pair Corralation between Regional Management and NorthView Acquisition

Allowing for the 90-day total investment horizon Regional Management is expected to generate 16.8 times less return on investment than NorthView Acquisition. But when comparing it to its historical volatility, Regional Management Corp is 8.77 times less risky than NorthView Acquisition. It trades about 0.04 of its potential returns per unit of risk. NorthView Acquisition is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  7.97  in NorthView Acquisition on September 27, 2024 and sell it today you would lose (1.44) from holding NorthView Acquisition or give up 18.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	67.19%
Values	Daily Returns

Regional Management Corp  vs.  NorthView Acquisition

Regional Management Corp

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Regional Management Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal primary indicators, Regional Management may actually be approaching a critical reversion point that can send shares even higher in January 2025.

NorthView Acquisition

Risk-Adjusted Performance

6 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NorthView Acquisition are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal fundamental indicators, NorthView Acquisition reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Regional Management and NorthView Acquisition

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

The idea behind Regional Management Corp and NorthView Acquisition 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.