Correlation Between Red Hill and Collins Foods

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

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

Diversification Opportunities for Red Hill and Collins Foods

-0.67

Correlation Coefficient

Red Hill  Collins Foods

Excellent diversification

The 3 months correlation between Red and Collins is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Red Hill Iron and Collins Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Collins Foods and Red Hill 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 Red Hill Iron are associated (or correlated) with Collins Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Collins Foods has no effect on the direction of Red Hill i.e., Red Hill and Collins Foods go up and down completely randomly.

Pair Corralation between Red Hill and Collins Foods

Assuming the 90 days trading horizon Red Hill Iron is expected to generate 1.44 times more return on investment than Collins Foods. However, Red Hill is 1.44 times more volatile than Collins Foods. It trades about 0.03 of its potential returns per unit of risk. Collins Foods is currently generating about 0.01 per unit of risk. If you would invest  310.00  in Red Hill Iron on October 4, 2024 and sell it today you would earn a total of  101.00  from holding Red Hill Iron or generate 32.58% return on investment over 90 days.

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

Red Hill Iron  vs.  Collins Foods

Red Hill Iron

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Red Hill Iron are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward indicators, Red Hill unveiled solid returns over the last few months and may actually be approaching a breakup point.

Collins Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Collins Foods 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 technical and fundamental indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Red Hill and Collins Foods

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

The idea behind Red Hill Iron and Collins Foods 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.