Correlation Between Boat Rocker and Automotive Finco

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

By analyzing existing cross correlation between Boat Rocker Media and Automotive Finco Corp, you can compare the effects of market volatilities on Boat Rocker and Automotive Finco 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 Boat Rocker with a short position of Automotive Finco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boat Rocker and Automotive Finco.

Diversification Opportunities for Boat Rocker and Automotive Finco

0.4

Correlation Coefficient

Boat Rocker  Automotive Finco

Very weak diversification

The 3 months correlation between Boat and Automotive is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Boat Rocker Media and Automotive Finco Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Automotive Finco Corp and Boat Rocker 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 Boat Rocker Media are associated (or correlated) with Automotive Finco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Automotive Finco Corp has no effect on the direction of Boat Rocker i.e., Boat Rocker and Automotive Finco go up and down completely randomly.

Pair Corralation between Boat Rocker and Automotive Finco

Assuming the 90 days trading horizon Boat Rocker Media is expected to generate 1.51 times more return on investment than Automotive Finco. However, Boat Rocker is 1.51 times more volatile than Automotive Finco Corp. It trades about 0.04 of its potential returns per unit of risk. Automotive Finco Corp is currently generating about 0.03 per unit of risk. If you would invest  67.00  in Boat Rocker Media on December 2, 2024 and sell it today you would earn a total of  4.00  from holding Boat Rocker Media or generate 5.97% return on investment over 90 days.

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

Boat Rocker Media  vs.  Automotive Finco Corp

Boat Rocker Media

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Boat Rocker Media are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Boat Rocker may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Automotive Finco Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Automotive Finco Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Automotive Finco is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Boat Rocker and Automotive Finco

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

The idea behind Boat Rocker Media and Automotive Finco Corp 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.