Correlation Between Safari Investments and RCL Foods

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

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

Diversification Opportunities for Safari Investments and RCL Foods

0.09

Correlation Coefficient

Safari Investments  RCL Foods

Significant diversification

The 3 months correlation between Safari and RCL is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Safari Investments RSA and RCL Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RCL Foods and Safari Investments 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 Safari Investments RSA are associated (or correlated) with RCL Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RCL Foods has no effect on the direction of Safari Investments i.e., Safari Investments and RCL Foods go up and down completely randomly.

Pair Corralation between Safari Investments and RCL Foods

Assuming the 90 days trading horizon Safari Investments RSA is expected to generate 0.6 times more return on investment than RCL Foods. However, Safari Investments RSA is 1.68 times less risky than RCL Foods. It trades about 0.34 of its potential returns per unit of risk. RCL Foods is currently generating about -0.05 per unit of risk. If you would invest  63,000  in Safari Investments RSA on October 13, 2024 and sell it today you would earn a total of  4,500  from holding Safari Investments RSA or generate 7.14% return on investment over 90 days.

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

Safari Investments RSA  vs.  RCL Foods

Safari Investments RSA

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Safari Investments RSA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Safari Investments exhibited solid returns over the last few months and may actually be approaching a breakup point.

RCL Foods

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in RCL Foods are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, RCL Foods may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Safari Investments and RCL Foods

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

The idea behind Safari Investments RSA and RCL Foods 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.