Correlation Between Rubicon Water and Firetail Resources

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

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

Diversification Opportunities for Rubicon Water and Firetail Resources

-0.12

Correlation Coefficient

Rubicon Water  Firetail Resources

Good diversification

The 3 months correlation between Rubicon and Firetail is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Rubicon Water and Firetail Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Firetail Resources 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 Firetail Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Firetail Resources has no effect on the direction of Rubicon Water i.e., Rubicon Water and Firetail Resources go up and down completely randomly.

Pair Corralation between Rubicon Water and Firetail Resources

Assuming the 90 days trading horizon Rubicon Water is expected to under-perform the Firetail Resources. But the stock apears to be less risky and, when comparing its historical volatility, Rubicon Water is 1.47 times less risky than Firetail Resources. The stock trades about -0.12 of its potential returns per unit of risk. The Firetail Resources is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  8.00  in Firetail Resources on November 29, 2024 and sell it today you would lose (1.40) from holding Firetail Resources or give up 17.5% of portfolio value over 90 days.

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

Rubicon Water  vs.  Firetail Resources

Rubicon Water

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rubicon Water has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's essential indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Firetail Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Firetail Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's essential indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Rubicon Water and Firetail Resources

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

The idea behind Rubicon Water and Firetail Resources 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.