Correlation Between Lease IT and RB FOOD

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

By analyzing existing cross correlation between Lease IT Public and RB FOOD SUPPLY, you can compare the effects of market volatilities on Lease IT and RB FOOD 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 Lease IT with a short position of RB FOOD. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lease IT and RB FOOD.

Diversification Opportunities for Lease IT and RB FOOD

0.76

Correlation Coefficient

Lease IT  RB FOOD

Poor diversification

The 3 months correlation between Lease and RBF-R is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Lease IT Public and RB FOOD SUPPLY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RB FOOD SUPPLY and Lease IT 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 Lease IT Public are associated (or correlated) with RB FOOD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RB FOOD SUPPLY has no effect on the direction of Lease IT i.e., Lease IT and RB FOOD go up and down completely randomly.

Pair Corralation between Lease IT and RB FOOD

Assuming the 90 days trading horizon Lease IT Public is expected to under-perform the RB FOOD. But the stock apears to be less risky and, when comparing its historical volatility, Lease IT Public is 2.27 times less risky than RB FOOD. The stock trades about -0.26 of its potential returns per unit of risk. The RB FOOD SUPPLY is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  1,047  in RB FOOD SUPPLY on October 11, 2024 and sell it today you would lose (342.00) from holding RB FOOD SUPPLY or give up 32.66% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.5%
Values	Daily Returns

Lease IT Public  vs.  RB FOOD SUPPLY

Lease IT Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lease IT Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

RB FOOD SUPPLY

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RB FOOD SUPPLY has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental drivers remain somewhat 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 Lease IT and RB FOOD

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

The idea behind Lease IT Public and RB FOOD SUPPLY 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.