Correlation Between Roctool and I2S SA

Can any of the company-specific risk be diversified away by investing in both Roctool and I2S SA 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 Roctool and I2S SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Roctool and i2S SA, you can compare the effects of market volatilities on Roctool and I2S SA 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 Roctool with a short position of I2S SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Roctool and I2S SA.

Diversification Opportunities for Roctool and I2S SA

0.22

Correlation Coefficient

Roctool  I2S SA

Modest diversification

The 3 months correlation between Roctool and I2S is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Roctool and i2S SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on i2S SA and Roctool 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 Roctool are associated (or correlated) with I2S SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of i2S SA has no effect on the direction of Roctool i.e., Roctool and I2S SA go up and down completely randomly.

Pair Corralation between Roctool and I2S SA

Assuming the 90 days trading horizon Roctool is expected to generate 1.45 times more return on investment than I2S SA. However, Roctool is 1.45 times more volatile than i2S SA. It trades about 0.03 of its potential returns per unit of risk. i2S SA is currently generating about -0.06 per unit of risk. If you would invest  40.00  in Roctool on December 30, 2024 and sell it today you would earn a total of  0.00  from holding Roctool or generate 0.0% return on investment over 90 days.

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

Roctool  vs.  i2S SA

Roctool

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Roctool are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Roctool may actually be approaching a critical reversion point that can send shares even higher in April 2025.

i2S SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days i2S SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Roctool and I2S SA

The main advantage of trading using opposite Roctool and I2S SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Roctool position performs unexpectedly, I2S SA 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 I2S SA will offset losses from the drop in I2S SA's long position.

The idea behind Roctool and i2S SA 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.