Correlation Between Willis Lease and Rocky Brands

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

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

Diversification Opportunities for Willis Lease and Rocky Brands

-0.41

Correlation Coefficient

Willis Lease  Rocky Brands

Very good diversification

The 3 months correlation between Willis and Rocky is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Willis Lease Finance and Rocky Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rocky Brands and Willis Lease 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 Willis Lease Finance 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 Willis Lease i.e., Willis Lease and Rocky Brands go up and down completely randomly.

Pair Corralation between Willis Lease and Rocky Brands

Given the investment horizon of 90 days Willis Lease Finance is expected to under-perform the Rocky Brands. In addition to that, Willis Lease is 1.24 times more volatile than Rocky Brands. It trades about -0.08 of its total potential returns per unit of risk. Rocky Brands is currently generating about 0.08 per unit of volatility. If you would invest  2,155  in Rocky Brands on November 28, 2024 and sell it today you would earn a total of  203.00  from holding Rocky Brands or generate 9.42% return on investment over 90 days.

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

Willis Lease Finance  vs.  Rocky Brands

Willis Lease Finance

Risk-Adjusted Performance

Very Weak

Over the last 90 days Willis Lease Finance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Rocky Brands

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Rocky Brands are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward-looking signals, Rocky Brands may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Willis Lease and Rocky Brands

The main advantage of trading using opposite Willis Lease and Rocky Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Willis Lease 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 Willis Lease Finance 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.