Correlation Between Rackla Metals and Rover Metals

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

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

Diversification Opportunities for Rackla Metals and Rover Metals

0.21

Correlation Coefficient

Rackla Metals  Rover Metals

Modest diversification

The 3 months correlation between Rackla and Rover is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Rackla Metals and Rover Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rover Metals Corp and Rackla Metals 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 Rackla Metals are associated (or correlated) with Rover Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rover Metals Corp has no effect on the direction of Rackla Metals i.e., Rackla Metals and Rover Metals go up and down completely randomly.

Pair Corralation between Rackla Metals and Rover Metals

Assuming the 90 days horizon Rackla Metals is expected to generate 3.45 times more return on investment than Rover Metals. However, Rackla Metals is 3.45 times more volatile than Rover Metals Corp. It trades about 0.17 of its potential returns per unit of risk. Rover Metals Corp is currently generating about -0.02 per unit of risk. If you would invest  8.70  in Rackla Metals on December 1, 2024 and sell it today you would earn a total of  2.30  from holding Rackla Metals or generate 26.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Rackla Metals  vs.  Rover Metals Corp

Rackla Metals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rackla Metals are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Rackla Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Rover Metals Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Rover Metals Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Rover Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rackla Metals and Rover Metals

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

The idea behind Rackla Metals and Rover Metals 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.