Correlation Between Empresa Distribuidora and Rocky Brands

Can any of the company-specific risk be diversified away by investing in both Empresa Distribuidora and Rocky Brands 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 Empresa Distribuidora and Rocky Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Empresa Distribuidora y and Rocky Brands, you can compare the effects of market volatilities on Empresa Distribuidora and Rocky Brands 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 Empresa Distribuidora with a short position of Rocky Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Empresa Distribuidora and Rocky Brands.

Diversification Opportunities for Empresa Distribuidora and Rocky Brands

-0.68

Correlation Coefficient

Empresa Distribuidora  Rocky Brands

Excellent diversification

The 3 months correlation between Empresa and Rocky is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Empresa Distribuidora y and Rocky Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rocky Brands and Empresa Distribuidora 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 Empresa Distribuidora y are associated (or correlated) with Rocky Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rocky Brands has no effect on the direction of Empresa Distribuidora i.e., Empresa Distribuidora and Rocky Brands go up and down completely randomly.

Pair Corralation between Empresa Distribuidora and Rocky Brands

Considering the 90-day investment horizon Empresa Distribuidora y is expected to generate 0.97 times more return on investment than Rocky Brands. However, Empresa Distribuidora y is 1.03 times less risky than Rocky Brands. It trades about 0.18 of its potential returns per unit of risk. Rocky Brands is currently generating about -0.08 per unit of risk. If you would invest  1,626  in Empresa Distribuidora y on October 13, 2024 and sell it today you would earn a total of  2,069  from holding Empresa Distribuidora y or generate 127.24% return on investment over 90 days.

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

Empresa Distribuidora y  vs.  Rocky Brands

Empresa Distribuidora

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Empresa Distribuidora y are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Empresa Distribuidora displayed solid returns over the last few months and may actually be approaching a breakup point.

Rocky Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rocky Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's forward-looking signals remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Empresa Distribuidora and Rocky Brands

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

The idea behind Empresa Distribuidora y and Rocky Brands 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.