Correlation Between Rocky Mountain and Weibo Corp

Can any of the company-specific risk be diversified away by investing in both Rocky Mountain and Weibo Corp 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 Rocky Mountain and Weibo Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Rocky Mountain Chocolate and Weibo Corp, you can compare the effects of market volatilities on Rocky Mountain and Weibo Corp 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 Rocky Mountain with a short position of Weibo Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rocky Mountain and Weibo Corp.

Diversification Opportunities for Rocky Mountain and Weibo Corp

0.05

Correlation Coefficient

Rocky Mountain  Weibo Corp

Significant diversification

The 3 months correlation between Rocky and Weibo is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Rocky Mountain Chocolate and Weibo Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weibo Corp and Rocky Mountain 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 Rocky Mountain Chocolate are associated (or correlated) with Weibo Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weibo Corp has no effect on the direction of Rocky Mountain i.e., Rocky Mountain and Weibo Corp go up and down completely randomly.

Pair Corralation between Rocky Mountain and Weibo Corp

Given the investment horizon of 90 days Rocky Mountain Chocolate is expected to under-perform the Weibo Corp. In addition to that, Rocky Mountain is 3.19 times more volatile than Weibo Corp. It trades about -0.16 of its total potential returns per unit of risk. Weibo Corp is currently generating about -0.08 per unit of volatility. If you would invest  991.00  in Weibo Corp on October 25, 2024 and sell it today you would lose (31.00) from holding Weibo Corp or give up 3.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

Rocky Mountain Chocolate  vs.  Weibo Corp

Rocky Mountain Chocolate

Risk-Adjusted Performance

0 of 100

Very Weak

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

Weibo Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Weibo Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Weibo Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Rocky Mountain and Weibo Corp

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

The idea behind Rocky Mountain Chocolate and Weibo Corp 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.