Correlation Between Radcom and SM Investments

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Can any of the company-specific risk be diversified away by investing in both Radcom and SM Investments 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 SM Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Radcom and SM Investments, you can compare the effects of market volatilities on Radcom and SM Investments 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 SM Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Radcom and SM Investments.

Diversification Opportunities for Radcom and SM Investments

0.64
  Correlation Coefficient

Poor diversification

The 3 months correlation between Radcom and SVTMF is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Radcom and SM Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SM Investments 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 SM Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SM Investments has no effect on the direction of Radcom i.e., Radcom and SM Investments go up and down completely randomly.

Pair Corralation between Radcom and SM Investments

Given the investment horizon of 90 days Radcom is expected to generate 2.3 times more return on investment than SM Investments. However, Radcom is 2.3 times more volatile than SM Investments. It trades about 0.19 of its potential returns per unit of risk. SM Investments is currently generating about 0.13 per unit of risk. If you would invest  1,061  in Radcom on April 21, 2025 and sell it today you would earn a total of  389.00  from holding Radcom or generate 36.66% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Radcom  vs.  SM Investments

 Performance 
       Timeline  
Radcom 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Radcom are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Radcom displayed solid returns over the last few months and may actually be approaching a breakup point.
SM Investments 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in SM Investments are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak primary indicators, SM Investments may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Radcom and SM Investments Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Radcom and SM Investments

The main advantage of trading using opposite Radcom and SM Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Radcom position performs unexpectedly, SM Investments 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 SM Investments will offset losses from the drop in SM Investments' long position.
The idea behind Radcom and SM Investments 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.

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