Correlation Between Rubicon Organics and Rocky Mountain

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

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

Diversification Opportunities for Rubicon Organics and Rocky Mountain

-0.6

Correlation Coefficient

Rubicon Organics  Rocky Mountain

Excellent diversification

The 3 months correlation between Rubicon and Rocky is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Rubicon Organics and Rocky Mountain Liquor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rocky Mountain Liquor 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 Rocky Mountain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rocky Mountain Liquor has no effect on the direction of Rubicon Organics i.e., Rubicon Organics and Rocky Mountain go up and down completely randomly.

Pair Corralation between Rubicon Organics and Rocky Mountain

Assuming the 90 days trading horizon Rubicon Organics is expected to generate 1.07 times less return on investment than Rocky Mountain. In addition to that, Rubicon Organics is 1.07 times more volatile than Rocky Mountain Liquor. It trades about 0.05 of its total potential returns per unit of risk. Rocky Mountain Liquor is currently generating about 0.06 per unit of volatility. If you would invest  9.00  in Rocky Mountain Liquor on December 30, 2024 and sell it today you would earn a total of  1.00  from holding Rocky Mountain Liquor or generate 11.11% return on investment over 90 days.

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

Rubicon Organics  vs.  Rocky Mountain Liquor

Rubicon Organics

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rubicon Organics are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal primary indicators, Rubicon Organics showed solid returns over the last few months and may actually be approaching a breakup point.

Rocky Mountain Liquor

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rocky Mountain Liquor are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Rocky Mountain showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rubicon Organics and Rocky Mountain

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

The idea behind Rubicon Organics and Rocky Mountain Liquor 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.