Correlation Between RCL Foods and AfroCentric Investment
Can any of the company-specific risk be diversified away by investing in both RCL Foods and AfroCentric Investment 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 RCL Foods and AfroCentric Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RCL Foods and AfroCentric Investment Corp, you can compare the effects of market volatilities on RCL Foods and AfroCentric Investment 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 RCL Foods with a short position of AfroCentric Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of RCL Foods and AfroCentric Investment.
Diversification Opportunities for RCL Foods and AfroCentric Investment
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between RCL and AfroCentric is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding RCL Foods and AfroCentric Investment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AfroCentric Investment and RCL Foods 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 RCL Foods are associated (or correlated) with AfroCentric Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AfroCentric Investment has no effect on the direction of RCL Foods i.e., RCL Foods and AfroCentric Investment go up and down completely randomly.
Pair Corralation between RCL Foods and AfroCentric Investment
Assuming the 90 days trading horizon RCL Foods is expected to generate 0.75 times more return on investment than AfroCentric Investment. However, RCL Foods is 1.33 times less risky than AfroCentric Investment. It trades about 0.01 of its potential returns per unit of risk. AfroCentric Investment Corp is currently generating about -0.03 per unit of risk. If you would invest 104,800 in RCL Foods on September 5, 2024 and sell it today you would lose (12,400) from holding RCL Foods or give up 11.83% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
RCL Foods vs. AfroCentric Investment Corp
Performance |
| Timeline |
| RCL Foods |
| AfroCentric Investment |
RCL Foods and AfroCentric Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RCL Foods and AfroCentric Investment
The main advantage of trading using opposite RCL Foods and AfroCentric Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RCL Foods position performs unexpectedly, AfroCentric Investment 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 AfroCentric Investment will offset losses from the drop in AfroCentric Investment's long position.The idea behind RCL Foods and AfroCentric Investment Corp 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.| AfroCentric Investment vs. Bytes Technology | AfroCentric Investment vs. Astral Foods | AfroCentric Investment vs. Afine Investments | AfroCentric Investment vs. British American Tobacco |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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