Correlation Between Canadian Utilities and Rocket Internet

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

By analyzing existing cross correlation between Canadian Utilities Limited and Rocket Internet SE, you can compare the effects of market volatilities on Canadian Utilities and Rocket Internet 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 Canadian Utilities with a short position of Rocket Internet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Utilities and Rocket Internet.

Diversification Opportunities for Canadian Utilities and Rocket Internet

-0.02

Correlation Coefficient

Canadian Utilities  Rocket Internet

Good diversification

The 3 months correlation between Canadian and Rocket is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Utilities Limited and Rocket Internet SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rocket Internet SE and Canadian Utilities 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 Canadian Utilities Limited are associated (or correlated) with Rocket Internet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rocket Internet SE has no effect on the direction of Canadian Utilities i.e., Canadian Utilities and Rocket Internet go up and down completely randomly.

Pair Corralation between Canadian Utilities and Rocket Internet

Assuming the 90 days horizon Canadian Utilities Limited is expected to under-perform the Rocket Internet. But the stock apears to be less risky and, when comparing its historical volatility, Canadian Utilities Limited is 1.89 times less risky than Rocket Internet. The stock trades about -0.14 of its potential returns per unit of risk. The Rocket Internet SE is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,450  in Rocket Internet SE on October 10, 2024 and sell it today you would earn a total of  50.00  from holding Rocket Internet SE or generate 3.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.44%
Values	Daily Returns

Canadian Utilities Limited  vs.  Rocket Internet SE

Canadian Utilities

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Utilities Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Canadian Utilities is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Rocket Internet SE

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rocket Internet SE are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Rocket Internet is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Canadian Utilities and Rocket Internet

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

The idea behind Canadian Utilities Limited and Rocket Internet SE 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.