Correlation Between Rock Tech and PREMIER FOODS

Can any of the company-specific risk be diversified away by investing in both Rock Tech and PREMIER 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 Rock Tech and PREMIER FOODS 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 PREMIER FOODS, you can compare the effects of market volatilities on Rock Tech and PREMIER 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 Rock Tech with a short position of PREMIER FOODS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rock Tech and PREMIER FOODS.

Diversification Opportunities for Rock Tech and PREMIER FOODS

-0.48

Correlation Coefficient

Rock Tech  PREMIER FOODS

Very good diversification

The 3 months correlation between Rock and PREMIER is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Rock Tech Lithium and PREMIER FOODS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PREMIER FOODS 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 PREMIER FOODS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PREMIER FOODS has no effect on the direction of Rock Tech i.e., Rock Tech and PREMIER FOODS go up and down completely randomly.

Pair Corralation between Rock Tech and PREMIER FOODS

Assuming the 90 days trading horizon Rock Tech Lithium is expected to generate 4.11 times more return on investment than PREMIER FOODS. However, Rock Tech is 4.11 times more volatile than PREMIER FOODS. It trades about 0.14 of its potential returns per unit of risk. PREMIER FOODS is currently generating about -0.1 per unit of risk. If you would invest  69.00  in Rock Tech Lithium on October 24, 2024 and sell it today you would earn a total of  10.00  from holding Rock Tech Lithium or generate 14.49% return on investment over 90 days.

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

Rock Tech Lithium  vs.  PREMIER FOODS

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 nearly stable forward indicators, Rock Tech is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

PREMIER FOODS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PREMIER FOODS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, PREMIER FOODS is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Rock Tech and PREMIER FOODS

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

The idea behind Rock Tech Lithium and PREMIER 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.