Correlation Between Rocky Brands and Vantage Drilling

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

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

Diversification Opportunities for Rocky Brands and Vantage Drilling

0.18

Correlation Coefficient

Rocky Brands  Vantage Drilling

Average diversification

The 3 months correlation between Rocky and Vantage is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Rocky Brands and Vantage Drilling International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vantage Drilling Int 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 Vantage Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vantage Drilling Int has no effect on the direction of Rocky Brands i.e., Rocky Brands and Vantage Drilling go up and down completely randomly.

Pair Corralation between Rocky Brands and Vantage Drilling

Given the investment horizon of 90 days Rocky Brands is expected to under-perform the Vantage Drilling. In addition to that, Rocky Brands is 11.19 times more volatile than Vantage Drilling International. It trades about -0.02 of its total potential returns per unit of risk. Vantage Drilling International is currently generating about -0.13 per unit of volatility. If you would invest  2,625  in Vantage Drilling International on October 26, 2024 and sell it today you would lose (75.00) from holding Vantage Drilling International or give up 2.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Rocky Brands  vs.  Vantage Drilling International

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 fairly strong forward-looking signals, Rocky Brands is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vantage Drilling Int

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vantage Drilling International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Vantage Drilling is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Rocky Brands and Vantage Drilling

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

The idea behind Rocky Brands and Vantage Drilling 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.