Correlation Between Rubicon Organics and First Trust

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

By analyzing existing cross correlation between Rubicon Organics and First Trust Indxx, you can compare the effects of market volatilities on Rubicon Organics and First Trust 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 Rubicon Organics with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rubicon Organics and First Trust.

Diversification Opportunities for Rubicon Organics and First Trust

-0.79

Correlation Coefficient

Rubicon Organics  First Trust

Pay attention - limited upside

The 3 months correlation between Rubicon and First is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Rubicon Organics and First Trust Indxx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Indxx and Rubicon Organics 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 Rubicon Organics are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Indxx has no effect on the direction of Rubicon Organics i.e., Rubicon Organics and First Trust go up and down completely randomly.

Pair Corralation between Rubicon Organics and First Trust

Assuming the 90 days trading horizon Rubicon Organics is expected to under-perform the First Trust. In addition to that, Rubicon Organics is 13.29 times more volatile than First Trust Indxx. It trades about -0.1 of its total potential returns per unit of risk. First Trust Indxx is currently generating about 0.16 per unit of volatility. If you would invest  1,114  in First Trust Indxx on August 31, 2024 and sell it today you would earn a total of  39.00  from holding First Trust Indxx or generate 3.5% return on investment over 90 days.

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

Rubicon Organics  vs.  First Trust Indxx

Rubicon Organics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rubicon Organics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's primary indicators remain fairly stable which may send shares a bit higher in December 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

First Trust Indxx

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Indxx are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, First Trust is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Rubicon Organics and First Trust

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

The idea behind Rubicon Organics and First Trust Indxx 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.