Correlation Between Argent and RCL Foods

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

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

Diversification Opportunities for Argent and RCL Foods

-0.57

Correlation Coefficient

Argent  RCL Foods

Excellent diversification

The 3 months correlation between Argent and RCL is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Argent and RCL Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RCL Foods and Argent 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 Argent are associated (or correlated) with RCL Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RCL Foods has no effect on the direction of Argent i.e., Argent and RCL Foods go up and down completely randomly.

Pair Corralation between Argent and RCL Foods

Assuming the 90 days trading horizon Argent is expected to under-perform the RCL Foods. But the stock apears to be less risky and, when comparing its historical volatility, Argent is 2.07 times less risky than RCL Foods. The stock trades about -0.08 of its potential returns per unit of risk. The RCL Foods is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  92,500  in RCL Foods on December 5, 2024 and sell it today you would earn a total of  12,500  from holding RCL Foods or generate 13.51% return on investment over 90 days.

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

Argent  vs.  RCL Foods

Argent

Risk-Adjusted Performance

Very Weak

Over the last 90 days Argent has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Argent is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

RCL Foods

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RCL Foods are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, RCL Foods exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Argent and RCL Foods

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

The idea behind Argent and RCL Foods 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.