Correlation Between RCL Foods and AfricaRhodium ETF

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

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

Diversification Opportunities for RCL Foods and AfricaRhodium ETF

-0.08

Correlation Coefficient

RCL Foods  AfricaRhodium ETF

Good diversification

The 3 months correlation between RCL and AfricaRhodium is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding RCL Foods and AfricaRhodium ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AfricaRhodium ETF 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 AfricaRhodium ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AfricaRhodium ETF has no effect on the direction of RCL Foods i.e., RCL Foods and AfricaRhodium ETF go up and down completely randomly.

Pair Corralation between RCL Foods and AfricaRhodium ETF

Assuming the 90 days trading horizon RCL Foods is expected to under-perform the AfricaRhodium ETF. In addition to that, RCL Foods is 1.55 times more volatile than AfricaRhodium ETF. It trades about -0.08 of its total potential returns per unit of risk. AfricaRhodium ETF is currently generating about 0.16 per unit of volatility. If you would invest  7,618,200  in AfricaRhodium ETF on October 21, 2024 and sell it today you would earn a total of  271,200  from holding AfricaRhodium ETF or generate 3.56% return on investment over 90 days.

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

RCL Foods  vs.  AfricaRhodium ETF

RCL Foods

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in RCL Foods are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, RCL Foods is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

AfricaRhodium ETF

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with RCL Foods and AfricaRhodium ETF

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

The idea behind RCL Foods and AfricaRhodium ETF 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.