Correlation Between Rmb Mendon and Rmb Japan

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

By analyzing existing cross correlation between Rmb Mendon Financial and Rmb Japan Fund, you can compare the effects of market volatilities on Rmb Mendon and Rmb Japan 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 Rmb Mendon with a short position of Rmb Japan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rmb Mendon and Rmb Japan.

Diversification Opportunities for Rmb Mendon and Rmb Japan

-0.59

Correlation Coefficient

Rmb Mendon  Rmb Japan

Excellent diversification

The 3 months correlation between Rmb and Rmb is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Rmb Mendon Financial and Rmb Japan Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rmb Japan Fund and Rmb Mendon 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 Rmb Mendon Financial are associated (or correlated) with Rmb Japan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rmb Japan Fund has no effect on the direction of Rmb Mendon i.e., Rmb Mendon and Rmb Japan go up and down completely randomly.

Pair Corralation between Rmb Mendon and Rmb Japan

Assuming the 90 days horizon Rmb Mendon Financial is expected to generate 1.29 times more return on investment than Rmb Japan. However, Rmb Mendon is 1.29 times more volatile than Rmb Japan Fund. It trades about 0.14 of its potential returns per unit of risk. Rmb Japan Fund is currently generating about -0.01 per unit of risk. If you would invest  4,730  in Rmb Mendon Financial on September 4, 2024 and sell it today you would earn a total of  795.00  from holding Rmb Mendon Financial or generate 16.81% return on investment over 90 days.

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

Rmb Mendon Financial  vs.  Rmb Japan Fund

Rmb Mendon Financial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rmb Mendon Financial are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward-looking signals, Rmb Mendon showed solid returns over the last few months and may actually be approaching a breakup point.

Rmb Japan Fund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rmb Japan Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Rmb Japan is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Rmb Mendon and Rmb Japan

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

The idea behind Rmb Mendon Financial and Rmb Japan Fund 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.