Correlation Between RCL Foods and Raubex
Can any of the company-specific risk be diversified away by investing in both RCL Foods and Raubex 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 Raubex into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RCL Foods and Raubex, you can compare the effects of market volatilities on RCL Foods and Raubex 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 Raubex. Check out your portfolio center. Please also check ongoing floating volatility patterns of RCL Foods and Raubex.
Diversification Opportunities for RCL Foods and Raubex
Very good diversification
The 3 months correlation between RCL and Raubex is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding RCL Foods and Raubex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raubex 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 Raubex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raubex has no effect on the direction of RCL Foods i.e., RCL Foods and Raubex go up and down completely randomly.
Pair Corralation between RCL Foods and Raubex
Assuming the 90 days trading horizon RCL Foods is expected to generate 6.67 times less return on investment than Raubex. But when comparing it to its historical volatility, RCL Foods is 1.53 times less risky than Raubex. It trades about 0.07 of its potential returns per unit of risk. Raubex is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 470,000 in Raubex on September 5, 2024 and sell it today you would earn a total of 55,300 from holding Raubex or generate 11.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
RCL Foods vs. Raubex
Performance |
| Timeline |
| RCL Foods |
| Raubex |
RCL Foods and Raubex Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RCL Foods and Raubex
The main advantage of trading using opposite RCL Foods and Raubex positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RCL Foods position performs unexpectedly, Raubex 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 Raubex will offset losses from the drop in Raubex's long position.The idea behind RCL Foods and Raubex 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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