Correlation Between RPM International and Oil Dri

Can any of the company-specific risk be diversified away by investing in both RPM International and Oil Dri 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 RPM International and Oil Dri into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for RPM International and Oil Dri

-0.14

Correlation Coefficient

RPM International  Oil Dri

Good diversification

The 3 months correlation between RPM and Oil is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding RPM International and Oil Dri in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oil Dri and RPM International 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 RPM International are associated (or correlated) with Oil Dri. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oil Dri has no effect on the direction of RPM International i.e., RPM International and Oil Dri go up and down completely randomly.

Pair Corralation between RPM International and Oil Dri

Considering the 90-day investment horizon RPM International is expected to under-perform the Oil Dri. But the stock apears to be less risky and, when comparing its historical volatility, RPM International is 4.62 times less risky than Oil Dri. The stock trades about -0.55 of its potential returns per unit of risk. The Oil Dri is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  6,956  in Oil Dri on September 27, 2024 and sell it today you would earn a total of  1,905  from holding Oil Dri or generate 27.39% return on investment over 90 days.

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

RPM International  vs.  Oil Dri

RPM International

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in RPM International are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, RPM International is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Oil Dri

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Oil Dri are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Oil Dri exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with RPM International and Oil Dri

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

The idea behind RPM International and Oil Dri 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.