Correlation Between Nongfu Spring and Rocky Mountain

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

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

Diversification Opportunities for Nongfu Spring and Rocky Mountain

-0.13

Correlation Coefficient

Nongfu Spring  Rocky Mountain

Good diversification

The 3 months correlation between Nongfu and Rocky is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Nongfu Spring Co and Rocky Mountain High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rocky Mountain High and Nongfu Spring 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 Nongfu Spring Co 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 High has no effect on the direction of Nongfu Spring i.e., Nongfu Spring and Rocky Mountain go up and down completely randomly.

Pair Corralation between Nongfu Spring and Rocky Mountain

Assuming the 90 days horizon Nongfu Spring Co is expected to under-perform the Rocky Mountain. But the pink sheet apears to be less risky and, when comparing its historical volatility, Nongfu Spring Co is 5.86 times less risky than Rocky Mountain. The pink sheet trades about 0.0 of its potential returns per unit of risk. The Rocky Mountain High is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1.49  in Rocky Mountain High on October 13, 2024 and sell it today you would lose (0.99) from holding Rocky Mountain High or give up 66.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.95%
Values	Daily Returns

Nongfu Spring Co  vs.  Rocky Mountain High

Nongfu Spring

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nongfu Spring Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Nongfu Spring is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Rocky Mountain High

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rocky Mountain High are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical indicators, Rocky Mountain sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nongfu Spring and Rocky Mountain

The main advantage of trading using opposite Nongfu Spring and Rocky Mountain positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nongfu Spring 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 Nongfu Spring Co and Rocky Mountain High 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.