Correlation Between Rubicon Organics and 1933 Industries

Can any of the company-specific risk be diversified away by investing in both Rubicon Organics and 1933 Industries 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 1933 Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Rubicon Organics and 1933 Industries, you can compare the effects of market volatilities on Rubicon Organics and 1933 Industries 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 1933 Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rubicon Organics and 1933 Industries.

Diversification Opportunities for Rubicon Organics and 1933 Industries

0.26

Correlation Coefficient

Rubicon Organics  1933 Industries

Modest diversification

The 3 months correlation between Rubicon and 1933 is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Rubicon Organics and 1933 Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 1933 Industries 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 1933 Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 1933 Industries has no effect on the direction of Rubicon Organics i.e., Rubicon Organics and 1933 Industries go up and down completely randomly.

Pair Corralation between Rubicon Organics and 1933 Industries

Assuming the 90 days horizon Rubicon Organics is expected to generate 6.43 times less return on investment than 1933 Industries. But when comparing it to its historical volatility, Rubicon Organics is 2.41 times less risky than 1933 Industries. It trades about 0.02 of its potential returns per unit of risk. 1933 Industries is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  0.96  in 1933 Industries on October 8, 2024 and sell it today you would lose (0.46) from holding 1933 Industries or give up 47.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.65%
Values	Daily Returns

Rubicon Organics  vs.  1933 Industries

Rubicon Organics

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rubicon Organics are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking indicators, Rubicon Organics reported solid returns over the last few months and may actually be approaching a breakup point.

1933 Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 1933 Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, 1933 Industries is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Rubicon Organics and 1933 Industries

The main advantage of trading using opposite Rubicon Organics and 1933 Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rubicon Organics position performs unexpectedly, 1933 Industries 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 1933 Industries will offset losses from the drop in 1933 Industries' long position.

The idea behind Rubicon Organics and 1933 Industries 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.