Correlation Between PREMIER FOODS and Rock Tech

Can any of the company-specific risk be diversified away by investing in both PREMIER FOODS and Rock Tech 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 PREMIER FOODS and Rock Tech into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PREMIER FOODS and Rock Tech Lithium, you can compare the effects of market volatilities on PREMIER FOODS and Rock Tech 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 PREMIER FOODS with a short position of Rock Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of PREMIER FOODS and Rock Tech.

Diversification Opportunities for PREMIER FOODS and Rock Tech

-0.28

Correlation Coefficient

PREMIER FOODS  Rock Tech

Very good diversification

The 3 months correlation between PREMIER and Rock is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding PREMIER FOODS and Rock Tech Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rock Tech Lithium and PREMIER FOODS 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 PREMIER FOODS are associated (or correlated) with Rock Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rock Tech Lithium has no effect on the direction of PREMIER FOODS i.e., PREMIER FOODS and Rock Tech go up and down completely randomly.

Pair Corralation between PREMIER FOODS and Rock Tech

Assuming the 90 days trading horizon PREMIER FOODS is expected to generate 375.34 times less return on investment than Rock Tech. But when comparing it to its historical volatility, PREMIER FOODS is 9.83 times less risky than Rock Tech. It trades about 0.0 of its potential returns per unit of risk. Rock Tech Lithium is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  70.00  in Rock Tech Lithium on October 10, 2024 and sell it today you would earn a total of  15.00  from holding Rock Tech Lithium or generate 21.43% return on investment over 90 days.

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

PREMIER FOODS  vs.  Rock Tech Lithium

PREMIER FOODS

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PREMIER FOODS are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, PREMIER FOODS is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Rock Tech Lithium

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rock Tech Lithium are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, Rock Tech may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with PREMIER FOODS and Rock Tech

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

The idea behind PREMIER FOODS and Rock Tech Lithium 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.