Correlation Between Polar Capital and Rockwood Realisation

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

By analyzing existing cross correlation between Polar Capital Technology and Rockwood Realisation PLC, you can compare the effects of market volatilities on Polar Capital and Rockwood Realisation 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 Polar Capital with a short position of Rockwood Realisation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Polar Capital and Rockwood Realisation.

Diversification Opportunities for Polar Capital and Rockwood Realisation

-0.49

Correlation Coefficient

Polar Capital  Rockwood Realisation

Very good diversification

The 3 months correlation between Polar and Rockwood is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Polar Capital Technology and Rockwood Realisation PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rockwood Realisation PLC and Polar Capital 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 Polar Capital Technology are associated (or correlated) with Rockwood Realisation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rockwood Realisation PLC has no effect on the direction of Polar Capital i.e., Polar Capital and Rockwood Realisation go up and down completely randomly.

Pair Corralation between Polar Capital and Rockwood Realisation

Assuming the 90 days trading horizon Polar Capital Technology is expected to generate 2.69 times more return on investment than Rockwood Realisation. However, Polar Capital is 2.69 times more volatile than Rockwood Realisation PLC. It trades about 0.25 of its potential returns per unit of risk. Rockwood Realisation PLC is currently generating about -0.07 per unit of risk. If you would invest  31,100  in Polar Capital Technology on September 5, 2024 and sell it today you would earn a total of  2,800  from holding Polar Capital Technology or generate 9.0% return on investment over 90 days.

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

Polar Capital Technology  vs.  Rockwood Realisation PLC

Polar Capital Technology

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Polar Capital Technology are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Polar Capital exhibited solid returns over the last few months and may actually be approaching a breakup point.

Rockwood Realisation PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rockwood Realisation PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Rockwood Realisation is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Polar Capital and Rockwood Realisation

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

The idea behind Polar Capital Technology and Rockwood Realisation PLC 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.