Correlation Between Sebata Holdings and RCL Foods

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

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

Diversification Opportunities for Sebata Holdings and RCL Foods

-0.23

Correlation Coefficient

Sebata Holdings  RCL Foods

Very good diversification

The 3 months correlation between Sebata and RCL is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Sebata Holdings and RCL Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RCL Foods and Sebata Holdings 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 Sebata Holdings 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 Sebata Holdings i.e., Sebata Holdings and RCL Foods go up and down completely randomly.

Pair Corralation between Sebata Holdings and RCL Foods

Assuming the 90 days trading horizon Sebata Holdings is expected to generate 1.55 times more return on investment than RCL Foods. However, Sebata Holdings is 1.55 times more volatile than RCL Foods. It trades about 0.07 of its potential returns per unit of risk. RCL Foods is currently generating about 0.09 per unit of risk. If you would invest  9,500  in Sebata Holdings on September 28, 2024 and sell it today you would earn a total of  300.00  from holding Sebata Holdings or generate 3.16% return on investment over 90 days.

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

Sebata Holdings  vs.  RCL Foods

Sebata Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sebata Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

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 January 2025.

Pair Trading with Sebata Holdings and RCL Foods

The main advantage of trading using opposite Sebata Holdings and RCL Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sebata Holdings 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 Sebata Holdings 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.