Correlation Between Rockwell Medical and INC Research

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

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

Diversification Opportunities for Rockwell Medical and INC Research

0.62

Correlation Coefficient

Rockwell Medical  INC Research

Poor diversification

The 3 months correlation between Rockwell and INC is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Rockwell Medical and INC Research Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INC Research Holdings and Rockwell Medical 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 Rockwell Medical are associated (or correlated) with INC Research. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INC Research Holdings has no effect on the direction of Rockwell Medical i.e., Rockwell Medical and INC Research go up and down completely randomly.

Pair Corralation between Rockwell Medical and INC Research

Given the investment horizon of 90 days Rockwell Medical is expected to generate 2.52 times less return on investment than INC Research. But when comparing it to its historical volatility, Rockwell Medical is 1.55 times less risky than INC Research. It trades about 0.1 of its potential returns per unit of risk. INC Research Holdings is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  140.00  in INC Research Holdings on October 6, 2024 and sell it today you would earn a total of  26.00  from holding INC Research Holdings or generate 18.57% return on investment over 90 days.

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

Rockwell Medical  vs.  INC Research Holdings

Rockwell Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rockwell Medical 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 basic indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

INC Research Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days INC Research Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, INC Research is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Rockwell Medical and INC Research

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

The idea behind Rockwell Medical and INC Research 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.