Correlation Between Rocket Companies and CNFinance Holdings

Can any of the company-specific risk be diversified away by investing in both Rocket Companies and CNFinance Holdings 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 Companies and CNFinance Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Rocket Companies and CNFinance Holdings, you can compare the effects of market volatilities on Rocket Companies and CNFinance Holdings 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 Companies with a short position of CNFinance Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rocket Companies and CNFinance Holdings.

Diversification Opportunities for Rocket Companies and CNFinance Holdings

-0.31

Correlation Coefficient

Rocket Companies  CNFinance Holdings

Very good diversification

The 3 months correlation between Rocket and CNFinance is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Rocket Companies and CNFinance Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNFinance Holdings and Rocket Companies 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 Companies are associated (or correlated) with CNFinance Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNFinance Holdings has no effect on the direction of Rocket Companies i.e., Rocket Companies and CNFinance Holdings go up and down completely randomly.

Pair Corralation between Rocket Companies and CNFinance Holdings

Considering the 90-day investment horizon Rocket Companies is expected to generate 0.75 times more return on investment than CNFinance Holdings. However, Rocket Companies is 1.34 times less risky than CNFinance Holdings. It trades about 0.11 of its potential returns per unit of risk. CNFinance Holdings is currently generating about -0.01 per unit of risk. If you would invest  1,044  in Rocket Companies on December 29, 2024 and sell it today you would earn a total of  259.00  from holding Rocket Companies or generate 24.81% return on investment over 90 days.

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

Rocket Companies  vs.  CNFinance Holdings

Rocket Companies

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rocket Companies are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent forward-looking signals, Rocket Companies unveiled solid returns over the last few months and may actually be approaching a breakup point.

CNFinance Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days CNFinance Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, CNFinance Holdings is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Rocket Companies and CNFinance Holdings

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

The idea behind Rocket Companies and CNFinance Holdings 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..