Correlation Between RCL Foods and Bowler Metcalf
Can any of the company-specific risk be diversified away by investing in both RCL Foods and Bowler Metcalf 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 Bowler Metcalf into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RCL Foods and Bowler Metcalf, you can compare the effects of market volatilities on RCL Foods and Bowler Metcalf 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 Bowler Metcalf. Check out your portfolio center. Please also check ongoing floating volatility patterns of RCL Foods and Bowler Metcalf.
Diversification Opportunities for RCL Foods and Bowler Metcalf
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between RCL and Bowler is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding RCL Foods and Bowler Metcalf in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bowler Metcalf 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 Bowler Metcalf. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bowler Metcalf has no effect on the direction of RCL Foods i.e., RCL Foods and Bowler Metcalf go up and down completely randomly.
Pair Corralation between RCL Foods and Bowler Metcalf
Assuming the 90 days trading horizon RCL Foods is expected to generate 7.33 times less return on investment than Bowler Metcalf. But when comparing it to its historical volatility, RCL Foods is 1.52 times less risky than Bowler Metcalf. It trades about 0.01 of its potential returns per unit of risk. Bowler Metcalf is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 91,265 in Bowler Metcalf on August 27, 2024 and sell it today you would earn a total of 45,635 from holding Bowler Metcalf or generate 50.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
RCL Foods vs. Bowler Metcalf
Performance |
| Timeline |
| RCL Foods |
| Bowler Metcalf |
RCL Foods and Bowler Metcalf Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RCL Foods and Bowler Metcalf
The main advantage of trading using opposite RCL Foods and Bowler Metcalf positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RCL Foods position performs unexpectedly, Bowler Metcalf 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 Bowler Metcalf will offset losses from the drop in Bowler Metcalf's long position.| RCL Foods vs. Standard Bank Group | RCL Foods vs. Ascendis Health | RCL Foods vs. City Lodge Hotels | RCL Foods vs. Advtech |
| Bowler Metcalf vs. Nampak | Bowler Metcalf vs. Sasol Ltd Bee | Bowler Metcalf vs. Growthpoint Properties | Bowler Metcalf vs. AfricaRhodium ETF |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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