Correlation Between Rocket Internet and Minerals Technologies
Can any of the company-specific risk be diversified away by investing in both Rocket Internet and Minerals Technologies 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 Rocket Internet and Minerals Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rocket Internet SE and Minerals Technologies, you can compare the effects of market volatilities on Rocket Internet and Minerals Technologies 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 Rocket Internet with a short position of Minerals Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rocket Internet and Minerals Technologies.
Diversification Opportunities for Rocket Internet and Minerals Technologies
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Rocket and Minerals is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Rocket Internet SE and Minerals Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Minerals Technologies and Rocket Internet 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 Rocket Internet SE are associated (or correlated) with Minerals Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Minerals Technologies has no effect on the direction of Rocket Internet i.e., Rocket Internet and Minerals Technologies go up and down completely randomly.
Pair Corralation between Rocket Internet and Minerals Technologies
Assuming the 90 days trading horizon Rocket Internet SE is expected to under-perform the Minerals Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Rocket Internet SE is 1.01 times less risky than Minerals Technologies. The stock trades about -0.03 of its potential returns per unit of risk. The Minerals Technologies is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 5,936 in Minerals Technologies on October 10, 2024 and sell it today you would earn a total of 1,164 from holding Minerals Technologies or generate 19.61% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Rocket Internet SE vs. Minerals Technologies
Performance |
Timeline |
Rocket Internet SE |
Minerals Technologies |
Rocket Internet and Minerals Technologies Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Rocket Internet and Minerals Technologies
The main advantage of trading using opposite Rocket Internet and Minerals Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rocket Internet position performs unexpectedly, Minerals Technologies 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 Minerals Technologies will offset losses from the drop in Minerals Technologies' long position.The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Rocket Internet as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Rocket Internet's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Rocket Internet's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Rocket Internet SE.
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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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