Correlation Between RJK Explorations and Hooker Furniture
Can any of the company-specific risk be diversified away by investing in both RJK Explorations and Hooker Furniture 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 RJK Explorations and Hooker Furniture into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RJK Explorations and Hooker Furniture, you can compare the effects of market volatilities on RJK Explorations and Hooker Furniture 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 RJK Explorations with a short position of Hooker Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of RJK Explorations and Hooker Furniture.
Diversification Opportunities for RJK Explorations and Hooker Furniture
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between RJK and Hooker is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding RJK Explorations and Hooker Furniture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hooker Furniture and RJK Explorations 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 RJK Explorations are associated (or correlated) with Hooker Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hooker Furniture has no effect on the direction of RJK Explorations i.e., RJK Explorations and Hooker Furniture go up and down completely randomly.
Pair Corralation between RJK Explorations and Hooker Furniture
Assuming the 90 days horizon RJK Explorations is expected to generate 10.26 times more return on investment than Hooker Furniture. However, RJK Explorations is 10.26 times more volatile than Hooker Furniture. It trades about 0.22 of its potential returns per unit of risk. Hooker Furniture is currently generating about -0.19 per unit of risk. If you would invest 1.51 in RJK Explorations on November 3, 2024 and sell it today you would earn a total of 0.99 from holding RJK Explorations or generate 65.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
RJK Explorations vs. Hooker Furniture
Performance |
| Timeline |
| RJK Explorations |
| Hooker Furniture |
RJK Explorations and Hooker Furniture Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RJK Explorations and Hooker Furniture
The main advantage of trading using opposite RJK Explorations and Hooker Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RJK Explorations position performs unexpectedly, Hooker Furniture 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 Hooker Furniture will offset losses from the drop in Hooker Furniture's long position.| RJK Explorations vs. Lincoln Electric Holdings | RJK Explorations vs. Merit Medical Systems | RJK Explorations vs. Direct Line Insurance | RJK Explorations vs. Root Inc |
| Hooker Furniture vs. Bassett Furniture Industries | Hooker Furniture vs. Natuzzi SpA | Hooker Furniture vs. Flexsteel Industries | Hooker Furniture vs. Hamilton Beach Brands |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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