Correlation Between Trencor and RCL Foods
Can any of the company-specific risk be diversified away by investing in both Trencor 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 Trencor and RCL Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Trencor and RCL Foods, you can compare the effects of market volatilities on Trencor 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 Trencor with a short position of RCL Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Trencor and RCL Foods.
Diversification Opportunities for Trencor and RCL Foods
Weak diversification
The 3 months correlation between Trencor and RCL is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Trencor and RCL Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RCL Foods and Trencor 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 Trencor 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 Trencor i.e., Trencor and RCL Foods go up and down completely randomly.
Pair Corralation between Trencor and RCL Foods
Assuming the 90 days trading horizon Trencor is expected to generate 1.15 times more return on investment than RCL Foods. However, Trencor is 1.15 times more volatile than RCL Foods. It trades about 0.09 of its potential returns per unit of risk. RCL Foods is currently generating about 0.08 per unit of risk. If you would invest 73,100 in Trencor on October 10, 2024 and sell it today you would earn a total of 6,400 from holding Trencor or generate 8.76% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 98.36% |
Values | Daily Returns |
Trencor vs. RCL Foods
Performance |
Timeline |
Trencor |
RCL Foods |
Trencor and RCL Foods Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Trencor and RCL Foods
The main advantage of trading using opposite Trencor and RCL Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trencor 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.Trencor vs. RCL Foods | Trencor vs. Blue Label Telecoms | Trencor vs. Reinet Investments SCA | Trencor vs. Safari Investments RSA |
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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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