Correlation Between Oil Equipment and Radcom

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

By analyzing existing cross correlation between Oil Equipment Services and Radcom, you can compare the effects of market volatilities on Oil Equipment and Radcom 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 Oil Equipment with a short position of Radcom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oil Equipment and Radcom.

Diversification Opportunities for Oil Equipment and Radcom

-0.11

Correlation Coefficient

Oil Equipment  Radcom

Good diversification

The 3 months correlation between Oil and Radcom is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Oil Equipment Services and Radcom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Radcom and Oil Equipment 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 Oil Equipment Services are associated (or correlated) with Radcom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Radcom has no effect on the direction of Oil Equipment i.e., Oil Equipment and Radcom go up and down completely randomly.

Pair Corralation between Oil Equipment and Radcom

Assuming the 90 days horizon Oil Equipment Services is expected to generate 0.52 times more return on investment than Radcom. However, Oil Equipment Services is 1.92 times less risky than Radcom. It trades about 0.11 of its potential returns per unit of risk. Radcom is currently generating about -0.02 per unit of risk. If you would invest  10,246  in Oil Equipment Services on March 1, 2024 and sell it today you would earn a total of  1,423  from holding Oil Equipment Services or generate 13.89% return on investment over 90 days.

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

Oil Equipment Services  vs.  Radcom

Oil Equipment Services

Risk-Adjusted Performance

8 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Oil Equipment Services are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Oil Equipment showed solid returns over the last few months and may actually be approaching a breakup point.

Radcom

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Radcom has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Radcom is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Oil Equipment and Radcom

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

The idea behind Oil Equipment Services and Radcom 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.

Check out your portfolio center.

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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..