Correlation Between Rock Tech and Focus Home

Can any of the company-specific risk be diversified away by investing in both Rock Tech and Focus Home 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 Rock Tech and Focus Home into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Rock Tech Lithium and Focus Home Interactive, you can compare the effects of market volatilities on Rock Tech and Focus Home 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 Rock Tech with a short position of Focus Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rock Tech and Focus Home.

Diversification Opportunities for Rock Tech and Focus Home

0.57

Correlation Coefficient

Rock Tech  Focus Home

Very weak diversification

The 3 months correlation between Rock and Focus is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Rock Tech Lithium and Focus Home Interactive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Focus Home Interactive and Rock Tech 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 Rock Tech Lithium are associated (or correlated) with Focus Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Focus Home Interactive has no effect on the direction of Rock Tech i.e., Rock Tech and Focus Home go up and down completely randomly.

Pair Corralation between Rock Tech and Focus Home

Assuming the 90 days trading horizon Rock Tech Lithium is expected to generate 2.69 times more return on investment than Focus Home. However, Rock Tech is 2.69 times more volatile than Focus Home Interactive. It trades about 0.04 of its potential returns per unit of risk. Focus Home Interactive is currently generating about -0.03 per unit of risk. If you would invest  68.00  in Rock Tech Lithium on September 24, 2024 and sell it today you would earn a total of  1.00  from holding Rock Tech Lithium or generate 1.47% return on investment over 90 days.

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

Rock Tech Lithium  vs.  Focus Home Interactive

Rock Tech Lithium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rock Tech Lithium has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Focus Home Interactive

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Focus Home Interactive has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Rock Tech and Focus Home

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

The idea behind Rock Tech Lithium and Focus Home Interactive 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.