Correlation Between Rayonier Advanced and ALEFARM BREWING

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

By analyzing existing cross correlation between Rayonier Advanced Materials and ALEFARM BREWING DK 05, you can compare the effects of market volatilities on Rayonier Advanced and ALEFARM BREWING 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 Rayonier Advanced with a short position of ALEFARM BREWING. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rayonier Advanced and ALEFARM BREWING.

Diversification Opportunities for Rayonier Advanced and ALEFARM BREWING

0.08

Correlation Coefficient

Rayonier Advanced  ALEFARM BREWING

Significant diversification

The 3 months correlation between Rayonier and ALEFARM is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Rayonier Advanced Materials and ALEFARM BREWING DK 05 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALEFARM BREWING DK and Rayonier Advanced 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 Rayonier Advanced Materials are associated (or correlated) with ALEFARM BREWING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALEFARM BREWING DK has no effect on the direction of Rayonier Advanced i.e., Rayonier Advanced and ALEFARM BREWING go up and down completely randomly.

Pair Corralation between Rayonier Advanced and ALEFARM BREWING

Assuming the 90 days horizon Rayonier Advanced Materials is expected to generate 0.8 times more return on investment than ALEFARM BREWING. However, Rayonier Advanced Materials is 1.25 times less risky than ALEFARM BREWING. It trades about 0.09 of its potential returns per unit of risk. ALEFARM BREWING DK 05 is currently generating about 0.03 per unit of risk. If you would invest  500.00  in Rayonier Advanced Materials on September 29, 2024 and sell it today you would earn a total of  215.00  from holding Rayonier Advanced Materials or generate 43.0% return on investment over 90 days.

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

Rayonier Advanced Materials  vs.  ALEFARM BREWING DK 05

Rayonier Advanced

Risk-Adjusted Performance

0 of 100

Very Weak

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

ALEFARM BREWING DK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ALEFARM BREWING DK 05 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Rayonier Advanced and ALEFARM BREWING

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

The idea behind Rayonier Advanced Materials and ALEFARM BREWING DK 05 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.