Correlation Between Rocky Mountain and Turning Point

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

By analyzing existing cross correlation between Rocky Mountain High and Turning Point Brands, you can compare the effects of market volatilities on Rocky Mountain and Turning Point 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 Turning Point. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rocky Mountain and Turning Point.

Diversification Opportunities for Rocky Mountain and Turning Point

-0.47

Correlation Coefficient

Rocky Mountain  Turning Point

Very good diversification

The 3 months correlation between Rocky and Turning is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Rocky Mountain High and Turning Point Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Turning Point Brands 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 High are associated (or correlated) with Turning Point. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Turning Point Brands has no effect on the direction of Rocky Mountain i.e., Rocky Mountain and Turning Point go up and down completely randomly.

Pair Corralation between Rocky Mountain and Turning Point

Given the investment horizon of 90 days Rocky Mountain High is expected to generate 21.19 times more return on investment than Turning Point. However, Rocky Mountain is 21.19 times more volatile than Turning Point Brands. It trades about 0.18 of its potential returns per unit of risk. Turning Point Brands is currently generating about -0.08 per unit of risk. If you would invest  0.62  in Rocky Mountain High on September 24, 2024 and sell it today you would earn a total of  0.08  from holding Rocky Mountain High or generate 12.9% return on investment over 90 days.

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

Rocky Mountain High  vs.  Turning Point Brands

Rocky Mountain High

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rocky Mountain High are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating technical indicators, Rocky Mountain sustained solid returns over the last few months and may actually be approaching a breakup point.

Turning Point Brands

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Turning Point Brands are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Turning Point sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rocky Mountain and Turning Point

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

The idea behind Rocky Mountain High and Turning Point Brands 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.