Correlation Between Rocky Brands and Willis Lease

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

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

Diversification Opportunities for Rocky Brands and Willis Lease

0.39

Correlation Coefficient

Rocky Brands  Willis Lease

Weak diversification

The 3 months correlation between Rocky and Willis is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Rocky Brands and Willis Lease Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Willis Lease Finance 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 Willis Lease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Willis Lease Finance has no effect on the direction of Rocky Brands i.e., Rocky Brands and Willis Lease go up and down completely randomly.

Pair Corralation between Rocky Brands and Willis Lease

Given the investment horizon of 90 days Rocky Brands is expected to under-perform the Willis Lease. But the stock apears to be less risky and, when comparing its historical volatility, Rocky Brands is 1.34 times less risky than Willis Lease. The stock trades about -0.13 of its potential returns per unit of risk. The Willis Lease Finance is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  20,439  in Willis Lease Finance on December 28, 2024 and sell it today you would lose (4,423) from holding Willis Lease Finance or give up 21.64% of portfolio value over 90 days.

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

Rocky Brands  vs.  Willis Lease Finance

Rocky Brands

Risk-Adjusted Performance

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

Willis Lease Finance

Risk-Adjusted Performance

Very Weak

Over the last 90 days Willis Lease Finance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Rocky Brands and Willis Lease

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

The idea behind Rocky Brands and Willis Lease Finance 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.