Correlation Between Sealed Air and Rocky Brands

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

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

Diversification Opportunities for Sealed Air and Rocky Brands

-0.05

Correlation Coefficient

Sealed Air  Rocky Brands

Good diversification

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

Pair Corralation between Sealed Air and Rocky Brands

Considering the 90-day investment horizon Sealed Air is expected to under-perform the Rocky Brands. But the stock apears to be less risky and, when comparing its historical volatility, Sealed Air is 2.11 times less risky than Rocky Brands. The stock trades about -0.03 of its potential returns per unit of risk. The Rocky Brands is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,664  in Rocky Brands on September 29, 2024 and sell it today you would lose (411.00) from holding Rocky Brands or give up 15.43% of portfolio value over 90 days.

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

Sealed Air  vs.  Rocky Brands

Sealed Air

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sealed Air has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Sealed Air is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Rocky Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rocky Brands 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 forward-looking signals remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Sealed Air and Rocky Brands

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

The idea behind Sealed Air and Rocky Brands 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.

Check out your portfolio center.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.