Correlation Between Chocoladefabriken and Rocky Mountain

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

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

Diversification Opportunities for Chocoladefabriken and Rocky Mountain

-0.87

Correlation Coefficient

Chocoladefabriken  Rocky Mountain

Pay attention - limited upside

The 3 months correlation between Chocoladefabriken and Rocky is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Chocoladefabriken Lindt Sprngl and Rocky Mountain Chocolate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rocky Mountain Chocolate and Chocoladefabriken 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 Chocoladefabriken Lindt Sprngli 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 Chocolate has no effect on the direction of Chocoladefabriken i.e., Chocoladefabriken and Rocky Mountain go up and down completely randomly.

Pair Corralation between Chocoladefabriken and Rocky Mountain

Assuming the 90 days horizon Chocoladefabriken Lindt Sprngli is expected to under-perform the Rocky Mountain. But the pink sheet apears to be less risky and, when comparing its historical volatility, Chocoladefabriken Lindt Sprngli is 3.33 times less risky than Rocky Mountain. The pink sheet trades about -0.12 of its potential returns per unit of risk. The Rocky Mountain Chocolate is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  185.00  in Rocky Mountain Chocolate on August 30, 2024 and sell it today you would earn a total of  97.00  from holding Rocky Mountain Chocolate or generate 52.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Chocoladefabriken Lindt Sprngl  vs.  Rocky Mountain Chocolate

Chocoladefabriken Lindt

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chocoladefabriken Lindt Sprngli has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Rocky Mountain Chocolate

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rocky Mountain Chocolate are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Rocky Mountain reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chocoladefabriken and Rocky Mountain

The main advantage of trading using opposite Chocoladefabriken and Rocky Mountain positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chocoladefabriken 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 Chocoladefabriken Lindt Sprngli and Rocky Mountain Chocolate 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.