Correlation Between Rockwood Realisation and CATCo Reinsurance
Can any of the company-specific risk be diversified away by investing in both Rockwood Realisation and CATCo Reinsurance 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 Rockwood Realisation and CATCo Reinsurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rockwood Realisation PLC and CATCo Reinsurance Opportunities, you can compare the effects of market volatilities on Rockwood Realisation and CATCo Reinsurance 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 Rockwood Realisation with a short position of CATCo Reinsurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rockwood Realisation and CATCo Reinsurance.
Diversification Opportunities for Rockwood Realisation and CATCo Reinsurance
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Rockwood and CATCo is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Rockwood Realisation PLC and CATCo Reinsurance Opportunitie in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CATCo Reinsurance and Rockwood Realisation 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 Rockwood Realisation PLC are associated (or correlated) with CATCo Reinsurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CATCo Reinsurance has no effect on the direction of Rockwood Realisation i.e., Rockwood Realisation and CATCo Reinsurance go up and down completely randomly.
Pair Corralation between Rockwood Realisation and CATCo Reinsurance
Assuming the 90 days trading horizon Rockwood Realisation PLC is expected to under-perform the CATCo Reinsurance. But the stock apears to be less risky and, when comparing its historical volatility, Rockwood Realisation PLC is 17.71 times less risky than CATCo Reinsurance. The stock trades about -0.16 of its potential returns per unit of risk. The CATCo Reinsurance Opportunities is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 2,500 in CATCo Reinsurance Opportunities on August 30, 2024 and sell it today you would earn a total of 1,250 from holding CATCo Reinsurance Opportunities or generate 50.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rockwood Realisation PLC vs. CATCo Reinsurance Opportunitie
Performance |
| Timeline |
| Rockwood Realisation PLC |
| CATCo Reinsurance |
Rockwood Realisation and CATCo Reinsurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rockwood Realisation and CATCo Reinsurance
The main advantage of trading using opposite Rockwood Realisation and CATCo Reinsurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rockwood Realisation position performs unexpectedly, CATCo Reinsurance 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 CATCo Reinsurance will offset losses from the drop in CATCo Reinsurance's long position.| Rockwood Realisation vs. Tungsten West PLC | Rockwood Realisation vs. Argo Group Limited | Rockwood Realisation vs. Hardide PLC | Rockwood Realisation vs. Versarien PLC |
| CATCo Reinsurance vs. Tungsten West PLC | CATCo Reinsurance vs. Argo Group Limited | CATCo Reinsurance vs. Hardide PLC | CATCo Reinsurance vs. Versarien PLC |
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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