Correlation Between Rubicon Water and Brickworks

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

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

Diversification Opportunities for Rubicon Water and Brickworks

0.05

Correlation Coefficient

Rubicon Water  Brickworks

Significant diversification

The 3 months correlation between Rubicon and Brickworks is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Rubicon Water and Brickworks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brickworks and Rubicon Water 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 Water are associated (or correlated) with Brickworks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brickworks has no effect on the direction of Rubicon Water i.e., Rubicon Water and Brickworks go up and down completely randomly.

Pair Corralation between Rubicon Water and Brickworks

Assuming the 90 days trading horizon Rubicon Water is expected to generate 4.31 times more return on investment than Brickworks. However, Rubicon Water is 4.31 times more volatile than Brickworks. It trades about 0.24 of its potential returns per unit of risk. Brickworks is currently generating about -0.03 per unit of risk. If you would invest  29.00  in Rubicon Water on October 22, 2024 and sell it today you would earn a total of  5.00  from holding Rubicon Water or generate 17.24% return on investment over 90 days.

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

Rubicon Water  vs.  Brickworks

Rubicon Water

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Rubicon Water are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Rubicon Water unveiled solid returns over the last few months and may actually be approaching a breakup point.

Brickworks

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brickworks has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Brickworks is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Rubicon Water and Brickworks

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

The idea behind Rubicon Water and Brickworks 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.