Correlation Between Financial and Rocky Mountain

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

By analyzing existing cross correlation between Financial 15 Split and Rocky Mountain Liquor, you can compare the effects of market volatilities on Financial and Rocky Mountain 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 Financial with a short position of Rocky Mountain. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial and Rocky Mountain.

Diversification Opportunities for Financial and Rocky Mountain

-0.46

Correlation Coefficient

Financial  Rocky Mountain

Very good diversification

The 3 months correlation between Financial and Rocky is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Financial 15 Split and Rocky Mountain Liquor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rocky Mountain Liquor and Financial 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 Financial 15 Split are associated (or correlated) with Rocky Mountain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rocky Mountain Liquor has no effect on the direction of Financial i.e., Financial and Rocky Mountain go up and down completely randomly.

Pair Corralation between Financial and Rocky Mountain

Assuming the 90 days trading horizon Financial 15 Split is expected to generate 0.05 times more return on investment than Rocky Mountain. However, Financial 15 Split is 19.16 times less risky than Rocky Mountain. It trades about 0.42 of its potential returns per unit of risk. Rocky Mountain Liquor is currently generating about -0.09 per unit of risk. If you would invest  1,045  in Financial 15 Split on November 29, 2024 and sell it today you would earn a total of  77.00  from holding Financial 15 Split or generate 7.37% return on investment over 90 days.

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

Financial 15 Split  vs.  Rocky Mountain Liquor

Financial 15 Split

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Financial 15 Split are ranked lower than 33 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Financial may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Rocky Mountain Liquor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rocky Mountain Liquor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in March 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Financial and Rocky Mountain

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

The idea behind Financial 15 Split and Rocky Mountain Liquor 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.