Correlation Between Various Eateries and Rockfire Resources

Can any of the company-specific risk be diversified away by investing in both Various Eateries and Rockfire Resources 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 Various Eateries and Rockfire Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Various Eateries PLC and Rockfire Resources plc, you can compare the effects of market volatilities on Various Eateries and Rockfire Resources 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 Various Eateries with a short position of Rockfire Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Various Eateries and Rockfire Resources.

Diversification Opportunities for Various Eateries and Rockfire Resources

0.2

Correlation Coefficient

Various Eateries  Rockfire Resources

Modest diversification

The 3 months correlation between Various and Rockfire is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Various Eateries PLC and Rockfire Resources plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rockfire Resources plc and Various Eateries 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 Various Eateries PLC are associated (or correlated) with Rockfire Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rockfire Resources plc has no effect on the direction of Various Eateries i.e., Various Eateries and Rockfire Resources go up and down completely randomly.

Pair Corralation between Various Eateries and Rockfire Resources

Assuming the 90 days trading horizon Various Eateries PLC is expected to generate 0.05 times more return on investment than Rockfire Resources. However, Various Eateries PLC is 18.55 times less risky than Rockfire Resources. It trades about 0.0 of its potential returns per unit of risk. Rockfire Resources plc is currently generating about -0.21 per unit of risk. If you would invest  1,800  in Various Eateries PLC on September 4, 2024 and sell it today you would earn a total of  0.00  from holding Various Eateries PLC or generate 0.0% return on investment over 90 days.

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

Various Eateries PLC  vs.  Rockfire Resources plc

Various Eateries PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Various Eateries PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Various Eateries is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Rockfire Resources plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rockfire Resources plc 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 basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Various Eateries and Rockfire Resources

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

The idea behind Various Eateries PLC and Rockfire Resources plc 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 Commodity Directory module to find actively traded commodities issued by global exchanges.