Correlation Between RCL Foods and Brait SE

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

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

Diversification Opportunities for RCL Foods and Brait SE

0.44

Correlation Coefficient

RCL Foods  Brait SE

Very weak diversification

The 3 months correlation between RCL and Brait is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding RCL Foods and Brait SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brait SE and RCL Foods 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 RCL Foods are associated (or correlated) with Brait SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brait SE has no effect on the direction of RCL Foods i.e., RCL Foods and Brait SE go up and down completely randomly.

Pair Corralation between RCL Foods and Brait SE

Assuming the 90 days trading horizon RCL Foods is expected to generate 0.91 times more return on investment than Brait SE. However, RCL Foods is 1.09 times less risky than Brait SE. It trades about 0.07 of its potential returns per unit of risk. Brait SE is currently generating about -0.1 per unit of risk. If you would invest  92,500  in RCL Foods on September 29, 2024 and sell it today you would earn a total of  2,000  from holding RCL Foods or generate 2.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

RCL Foods  vs.  Brait SE

RCL Foods

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RCL Foods are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, RCL Foods may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Brait SE

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Brait SE are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Brait SE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with RCL Foods and Brait SE

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

The idea behind RCL Foods and Brait SE 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.

Check out your portfolio center.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.