Correlation Between Rocky Brands and Flexible Solutions

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

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

Diversification Opportunities for Rocky Brands and Flexible Solutions

-0.69

Correlation Coefficient

Rocky Brands  Flexible Solutions

Excellent diversification

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

Pair Corralation between Rocky Brands and Flexible Solutions

Given the investment horizon of 90 days Rocky Brands is expected to generate 1.12 times more return on investment than Flexible Solutions. However, Rocky Brands is 1.12 times more volatile than Flexible Solutions International. It trades about 0.04 of its potential returns per unit of risk. Flexible Solutions International is currently generating about -0.32 per unit of risk. If you would invest  2,253  in Rocky Brands on September 24, 2024 and sell it today you would earn a total of  31.00  from holding Rocky Brands or generate 1.38% return on investment over 90 days.

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

Rocky Brands  vs.  Flexible Solutions Internation

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 uncertain performance in the last few months, the Stock's forward-looking signals remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Flexible Solutions

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Flexible Solutions International are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Flexible Solutions may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Rocky Brands and Flexible Solutions

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

The idea behind Rocky Brands and Flexible Solutions International 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.