Correlation Between Rocky Brands and CompoSecure

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

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

Diversification Opportunities for Rocky Brands and CompoSecure

-0.52

Correlation Coefficient

Rocky Brands  CompoSecure

Excellent diversification

The 3 months correlation between Rocky and CompoSecure is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Rocky Brands and CompoSecure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CompoSecure and Rocky Brands 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 Rocky Brands are associated (or correlated) with CompoSecure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CompoSecure has no effect on the direction of Rocky Brands i.e., Rocky Brands and CompoSecure go up and down completely randomly.

Pair Corralation between Rocky Brands and CompoSecure

Given the investment horizon of 90 days Rocky Brands is expected to under-perform the CompoSecure. But the stock apears to be less risky and, when comparing its historical volatility, Rocky Brands is 1.26 times less risky than CompoSecure. The stock trades about -0.08 of its potential returns per unit of risk. The CompoSecure is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  358.00  in CompoSecure on October 3, 2024 and sell it today you would earn a total of  107.00  from holding CompoSecure or generate 29.89% return on investment over 90 days.

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

Rocky Brands  vs.  CompoSecure

Rocky Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rocky Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's forward-looking signals remain fairly 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.

CompoSecure

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CompoSecure are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, CompoSecure showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rocky Brands and CompoSecure

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

The idea behind Rocky Brands and CompoSecure 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.