Correlation Between CLS Holdings and Rubicon Organics

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

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

Diversification Opportunities for CLS Holdings and Rubicon Organics

-0.34

Correlation Coefficient

CLS Holdings  Rubicon Organics

Very good diversification

The 3 months correlation between CLS and Rubicon is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding CLS Holdings USA and Rubicon Organics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rubicon Organics and CLS Holdings 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 CLS Holdings USA are associated (or correlated) with Rubicon Organics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rubicon Organics has no effect on the direction of CLS Holdings i.e., CLS Holdings and Rubicon Organics go up and down completely randomly.

Pair Corralation between CLS Holdings and Rubicon Organics

Given the investment horizon of 90 days CLS Holdings USA is expected to generate 1.75 times more return on investment than Rubicon Organics. However, CLS Holdings is 1.75 times more volatile than Rubicon Organics. It trades about 0.02 of its potential returns per unit of risk. Rubicon Organics is currently generating about -0.03 per unit of risk. If you would invest  3.35  in CLS Holdings USA on December 2, 2024 and sell it today you would lose (0.30) from holding CLS Holdings USA or give up 8.96% of portfolio value over 90 days.

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

CLS Holdings USA  vs.  Rubicon Organics

CLS Holdings USA

Risk-Adjusted Performance

Very Weak

Over the last 90 days CLS Holdings USA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, CLS Holdings is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Rubicon Organics

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rubicon Organics are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking indicators, Rubicon Organics reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CLS Holdings and Rubicon Organics

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

The idea behind CLS Holdings USA and Rubicon Organics 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .