Correlation Between Rmb Smid and Rmb Mendon

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

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

Diversification Opportunities for Rmb Smid and Rmb Mendon

0.9

Correlation Coefficient

Rmb Smid  Rmb Mendon

Almost no diversification

The 3 months correlation between Rmb and Rmb is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Rmb Smid Cap and Rmb Mendon Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rmb Mendon Financial and Rmb Smid 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 Smid Cap are associated (or correlated) with Rmb Mendon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rmb Mendon Financial has no effect on the direction of Rmb Smid i.e., Rmb Smid and Rmb Mendon go up and down completely randomly.

Pair Corralation between Rmb Smid and Rmb Mendon

Assuming the 90 days horizon Rmb Smid is expected to generate 1.19 times less return on investment than Rmb Mendon. But when comparing it to its historical volatility, Rmb Smid Cap is 1.59 times less risky than Rmb Mendon. It trades about 0.06 of its potential returns per unit of risk. Rmb Mendon Financial is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  4,106  in Rmb Mendon Financial on September 5, 2024 and sell it today you would earn a total of  1,366  from holding Rmb Mendon Financial or generate 33.27% return on investment over 90 days.

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

Rmb Smid Cap  vs.  Rmb Mendon Financial

Rmb Smid Cap

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rmb Smid Cap are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak primary indicators, Rmb Smid may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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.

Pair Trading with Rmb Smid and Rmb Mendon

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

The idea behind Rmb Smid Cap and Rmb Mendon Financial 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.