Correlation Between FC Investment and Rockfire Resources
Can any of the company-specific risk be diversified away by investing in both FC Investment 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 FC Investment and Rockfire Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FC Investment Trust and Rockfire Resources plc, you can compare the effects of market volatilities on FC Investment 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 FC Investment with a short position of Rockfire Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of FC Investment and Rockfire Resources.
Diversification Opportunities for FC Investment and Rockfire Resources
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between FCIT and Rockfire is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding FC Investment Trust 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 FC Investment 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 FC Investment Trust 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 FC Investment i.e., FC Investment and Rockfire Resources go up and down completely randomly.
Pair Corralation between FC Investment and Rockfire Resources
Assuming the 90 days trading horizon FC Investment is expected to generate 5.96 times less return on investment than Rockfire Resources. But when comparing it to its historical volatility, FC Investment Trust is 18.42 times less risky than Rockfire Resources. It trades about 0.27 of its potential returns per unit of risk. Rockfire Resources plc is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 11.00 in Rockfire Resources plc on October 25, 2024 and sell it today you would earn a total of 4.00 from holding Rockfire Resources plc or generate 36.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
FC Investment Trust vs. Rockfire Resources plc
Performance |
| Timeline |
| FC Investment Trust |
| Rockfire Resources plc |
FC Investment and Rockfire Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FC Investment and Rockfire Resources
The main advantage of trading using opposite FC Investment and Rockfire Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FC Investment 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.| FC Investment vs. Associated British Foods | FC Investment vs. Jacquet Metal Service | FC Investment vs. Beowulf Mining | FC Investment vs. First Class Metals |
| Rockfire Resources vs. Vitec Software Group | Rockfire Resources vs. Young Cos Brewery | Rockfire Resources vs. CAP LEASE AVIATION | Rockfire Resources vs. Check Point Software |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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