Correlation Between INC Research and Rockwell Medical

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

By analyzing existing cross correlation between INC Research Holdings and Rockwell Medical, you can compare the effects of market volatilities on INC Research and Rockwell Medical 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 INC Research with a short position of Rockwell Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of INC Research and Rockwell Medical.

Diversification Opportunities for INC Research and Rockwell Medical

0.39

Correlation Coefficient

INC Research  Rockwell Medical

Weak diversification

The 3 months correlation between INC and Rockwell is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding INC Research Holdings and Rockwell Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rockwell Medical and INC Research 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 INC Research Holdings are associated (or correlated) with Rockwell Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rockwell Medical has no effect on the direction of INC Research i.e., INC Research and Rockwell Medical go up and down completely randomly.

Pair Corralation between INC Research and Rockwell Medical

Given the investment horizon of 90 days INC Research Holdings is expected to under-perform the Rockwell Medical. But the stock apears to be less risky and, when comparing its historical volatility, INC Research Holdings is 1.21 times less risky than Rockwell Medical. The stock trades about -0.01 of its potential returns per unit of risk. The Rockwell Medical is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  145.00  in Rockwell Medical on October 21, 2024 and sell it today you would earn a total of  67.00  from holding Rockwell Medical or generate 46.21% return on investment over 90 days.

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

INC Research Holdings  vs.  Rockwell Medical

INC Research Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in INC Research Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile fundamental indicators, INC Research may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Rockwell Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rockwell Medical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with INC Research and Rockwell Medical

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

The idea behind INC Research Holdings and Rockwell Medical 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.

Check out your portfolio center.

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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.