Correlation Between Copper 360 and RCL Foods

Can any of the company-specific risk be diversified away by investing in both Copper 360 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 Copper 360 and RCL Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Copper 360 and RCL Foods, you can compare the effects of market volatilities on Copper 360 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 Copper 360 with a short position of RCL Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Copper 360 and RCL Foods.

Diversification Opportunities for Copper 360 and RCL Foods

-0.47

Correlation Coefficient

Copper 360  RCL Foods

Very good diversification

The 3 months correlation between Copper and RCL is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Copper 360 and RCL Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RCL Foods and Copper 360 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 Copper 360 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 Copper 360 i.e., Copper 360 and RCL Foods go up and down completely randomly.

Pair Corralation between Copper 360 and RCL Foods

Assuming the 90 days trading horizon Copper 360 is expected to under-perform the RCL Foods. In addition to that, Copper 360 is 1.77 times more volatile than RCL Foods. It trades about -0.12 of its total potential returns per unit of risk. RCL Foods is currently generating about 0.11 per unit of volatility. If you would invest  85,000  in RCL Foods on September 15, 2024 and sell it today you would earn a total of  11,300  from holding RCL Foods or generate 13.29% return on investment over 90 days.

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

Copper 360  vs.  RCL Foods

Copper 360

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Copper 360 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

RCL Foods

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RCL Foods are ranked lower than 8 (%) 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 Copper 360 and RCL Foods

The main advantage of trading using opposite Copper 360 and RCL Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Copper 360 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 Copper 360 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.