Correlation Between Caledonia Investments and Rockfire Resources
Can any of the company-specific risk be diversified away by investing in both Caledonia Investments 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 Caledonia Investments and Rockfire Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caledonia Investments and Rockfire Resources plc, you can compare the effects of market volatilities on Caledonia Investments 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 Caledonia Investments with a short position of Rockfire Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caledonia Investments and Rockfire Resources.
Diversification Opportunities for Caledonia Investments and Rockfire Resources
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Caledonia and Rockfire is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Caledonia Investments 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 Caledonia Investments 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 Caledonia Investments 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 Caledonia Investments i.e., Caledonia Investments and Rockfire Resources go up and down completely randomly.
Pair Corralation between Caledonia Investments and Rockfire Resources
Assuming the 90 days trading horizon Caledonia Investments is expected to generate 7.76 times less return on investment than Rockfire Resources. But when comparing it to its historical volatility, Caledonia Investments is 15.43 times less risky than Rockfire Resources. It trades about 0.22 of its potential returns per unit of risk. Rockfire Resources plc is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 14.00 in Rockfire Resources plc on October 10, 2024 and sell it today you would earn a total of 2.00 from holding Rockfire Resources plc or generate 14.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.0% |
| Values | Daily Returns |
Caledonia Investments vs. Rockfire Resources plc
Performance |
| Timeline |
| Caledonia Investments |
| Rockfire Resources plc |
Caledonia Investments and Rockfire Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caledonia Investments and Rockfire Resources
The main advantage of trading using opposite Caledonia Investments and Rockfire Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caledonia Investments 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.| Caledonia Investments vs. Chrysalis Investments | Caledonia Investments vs. Tavistock Investments Plc | Caledonia Investments vs. Cairo Communication SpA | Caledonia Investments vs. New Residential Investment |
| Rockfire Resources vs. Caledonia Investments | Rockfire Resources vs. Chrysalis Investments | Rockfire Resources vs. Premier Foods PLC | Rockfire Resources vs. FC Investment Trust |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
Other Complementary Tools
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Stocks Directory Find actively traded stocks across global markets | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| CEOs Directory Screen CEOs from public companies around the world |