Correlation Between American Rebel and Rocky Brands

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

By analyzing existing cross correlation between American Rebel Holdings and Rocky Brands, you can compare the effects of market volatilities on American Rebel and Rocky Brands 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 American Rebel with a short position of Rocky Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Rebel and Rocky Brands.

Diversification Opportunities for American Rebel and Rocky Brands

0.43

Correlation Coefficient

American Rebel  Rocky Brands

Very weak diversification

The 3 months correlation between American and Rocky is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding American Rebel Holdings and Rocky Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rocky Brands and American Rebel 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 American Rebel Holdings are associated (or correlated) with Rocky Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rocky Brands has no effect on the direction of American Rebel i.e., American Rebel and Rocky Brands go up and down completely randomly.

Pair Corralation between American Rebel and Rocky Brands

Assuming the 90 days horizon American Rebel Holdings is expected to generate 14.68 times more return on investment than Rocky Brands. However, American Rebel is 14.68 times more volatile than Rocky Brands. It trades about 0.16 of its potential returns per unit of risk. Rocky Brands is currently generating about -0.04 per unit of risk. If you would invest  0.82  in American Rebel Holdings on November 29, 2024 and sell it today you would earn a total of  0.85  from holding American Rebel Holdings or generate 103.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	91.67%
Values	Daily Returns

American Rebel Holdings  vs.  Rocky Brands

American Rebel Holdings

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Rebel Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady fundamental drivers, American Rebel showed solid returns over the last few months and may actually be approaching a breakup point.

Rocky Brands

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rocky Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward-looking signals, Rocky Brands is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with American Rebel and Rocky Brands

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

The idea behind American Rebel Holdings and Rocky Brands 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.