Correlation Between Radcom and Alderon Iron

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

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

Diversification Opportunities for Radcom and Alderon Iron

0.0

Correlation Coefficient

Radcom  Alderon Iron

Pay attention - limited upside

The 3 months correlation between Radcom and Alderon is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Radcom and Alderon Iron Ore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alderon Iron Ore and Radcom 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 Radcom are associated (or correlated) with Alderon Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alderon Iron Ore has no effect on the direction of Radcom i.e., Radcom and Alderon Iron go up and down completely randomly.

Pair Corralation between Radcom and Alderon Iron

Given the investment horizon of 90 days Radcom is expected to under-perform the Alderon Iron. But the stock apears to be less risky and, when comparing its historical volatility, Radcom is 65.59 times less risky than Alderon Iron. The stock trades about -0.29 of its potential returns per unit of risk. The Alderon Iron Ore is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  0.00  in Alderon Iron Ore on January 25, 2024 and sell it today you would earn a total of  0.00  from holding Alderon Iron Ore or generate 9.223372036854776E16% return on investment over 90 days.

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

Radcom  vs.  Alderon Iron Ore

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 recent stock price disarray, may contribute to short-term losses for the investors.

Alderon Iron Ore

Risk-Adjusted Performance

9 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Alderon Iron Ore are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Alderon Iron reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Radcom and Alderon Iron

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

The idea behind Radcom and Alderon Iron Ore 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.