Correlation Between Boat Rocker and Aluula Composites

Can any of the company-specific risk be diversified away by investing in both Boat Rocker and Aluula Composites 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 Aluula Composites 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 Aluula Composites, you can compare the effects of market volatilities on Boat Rocker and Aluula Composites 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 Aluula Composites. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boat Rocker and Aluula Composites.

Diversification Opportunities for Boat Rocker and Aluula Composites

0.6

Correlation Coefficient

Boat Rocker  Aluula Composites

Poor diversification

The 3 months correlation between Boat and Aluula is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Boat Rocker Media and Aluula Composites in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aluula Composites 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 Aluula Composites. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aluula Composites has no effect on the direction of Boat Rocker i.e., Boat Rocker and Aluula Composites go up and down completely randomly.

Pair Corralation between Boat Rocker and Aluula Composites

Assuming the 90 days trading horizon Boat Rocker Media is expected to under-perform the Aluula Composites. But the stock apears to be less risky and, when comparing its historical volatility, Boat Rocker Media is 1.81 times less risky than Aluula Composites. The stock trades about -0.12 of its potential returns per unit of risk. The Aluula Composites is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  12.00  in Aluula Composites on September 15, 2024 and sell it today you would lose (1.00) from holding Aluula Composites or give up 8.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Boat Rocker Media  vs.  Aluula Composites

Boat Rocker Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boat Rocker Media has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Aluula Composites

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aluula Composites are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Aluula Composites may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Boat Rocker and Aluula Composites

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

The idea behind Boat Rocker Media and Aluula Composites 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.