Correlation Between RPM International and Hawkins
Can any of the company-specific risk be diversified away by investing in both RPM International and Hawkins 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 RPM International and Hawkins into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RPM International and Hawkins, you can compare the effects of market volatilities on RPM International and Hawkins 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 RPM International with a short position of Hawkins. Check out your portfolio center. Please also check ongoing floating volatility patterns of RPM International and Hawkins.
Diversification Opportunities for RPM International and Hawkins
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between RPM and Hawkins is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding RPM International and Hawkins in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hawkins and RPM International 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 RPM International are associated (or correlated) with Hawkins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hawkins has no effect on the direction of RPM International i.e., RPM International and Hawkins go up and down completely randomly.
Pair Corralation between RPM International and Hawkins
Considering the 90-day investment horizon RPM International is expected to generate 1.96 times less return on investment than Hawkins. But when comparing it to its historical volatility, RPM International is 2.65 times less risky than Hawkins. It trades about 0.3 of its potential returns per unit of risk. Hawkins is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 11,675 in Hawkins on August 28, 2024 and sell it today you would earn a total of 1,872 from holding Hawkins or generate 16.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
RPM International vs. Hawkins
Performance |
| Timeline |
| RPM International |
| Hawkins |
RPM International and Hawkins Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RPM International and Hawkins
The main advantage of trading using opposite RPM International and Hawkins positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RPM International position performs unexpectedly, Hawkins 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 Hawkins will offset losses from the drop in Hawkins' long position.| RPM International vs. Innospec | RPM International vs. Minerals Technologies | RPM International vs. Oil Dri | RPM International vs. Quaker Chemical |
| Hawkins vs. H B Fuller | Hawkins vs. Minerals Technologies | Hawkins vs. Quaker Chemical | Hawkins vs. Oil Dri |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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