Correlation Between ROK Resources and Coelacanth Energy

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

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

Diversification Opportunities for ROK Resources and Coelacanth Energy

0.78

Correlation Coefficient

ROK Resources  Coelacanth Energy

Poor diversification

The 3 months correlation between ROK and Coelacanth is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding ROK Resources and Coelacanth Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coelacanth Energy and ROK Resources 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 ROK Resources are associated (or correlated) with Coelacanth Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coelacanth Energy has no effect on the direction of ROK Resources i.e., ROK Resources and Coelacanth Energy go up and down completely randomly.

Pair Corralation between ROK Resources and Coelacanth Energy

Assuming the 90 days horizon ROK Resources is expected to generate 2.61 times more return on investment than Coelacanth Energy. However, ROK Resources is 2.61 times more volatile than Coelacanth Energy. It trades about -0.03 of its potential returns per unit of risk. Coelacanth Energy is currently generating about -0.09 per unit of risk. If you would invest  14.00  in ROK Resources on September 4, 2024 and sell it today you would lose (2.00) from holding ROK Resources or give up 14.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

ROK Resources  vs.  Coelacanth Energy

ROK Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ROK Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Coelacanth Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Coelacanth Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with ROK Resources and Coelacanth Energy

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

The idea behind ROK Resources and Coelacanth Energy 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.

Check out your portfolio center.

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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.