Correlation Between Leons Furniture and RT Minerals

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

By analyzing existing cross correlation between Leons Furniture Limited and RT Minerals Corp, you can compare the effects of market volatilities on Leons Furniture and RT Minerals 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 Leons Furniture with a short position of RT Minerals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leons Furniture and RT Minerals.

Diversification Opportunities for Leons Furniture and RT Minerals

0.69

Correlation Coefficient

Leons Furniture  RT Minerals

Poor diversification

The 3 months correlation between Leons and RTM is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Leons Furniture Limited and RT Minerals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RT Minerals Corp and Leons Furniture 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 Leons Furniture Limited are associated (or correlated) with RT Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RT Minerals Corp has no effect on the direction of Leons Furniture i.e., Leons Furniture and RT Minerals go up and down completely randomly.

Pair Corralation between Leons Furniture and RT Minerals

Assuming the 90 days trading horizon Leons Furniture Limited is expected to under-perform the RT Minerals. But the stock apears to be less risky and, when comparing its historical volatility, Leons Furniture Limited is 5.7 times less risky than RT Minerals. The stock trades about -0.2 of its potential returns per unit of risk. The RT Minerals Corp is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  11.00  in RT Minerals Corp on October 22, 2024 and sell it today you would earn a total of  3.00  from holding RT Minerals Corp or generate 27.27% return on investment over 90 days.

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

Leons Furniture Limited  vs.  RT Minerals Corp

Leons Furniture

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Leons Furniture Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

RT Minerals Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RT Minerals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, RT Minerals is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Leons Furniture and RT Minerals

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

The idea behind Leons Furniture Limited and RT Minerals Corp 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..