Correlation Between Elmos Semiconductor and Rockfire Resources

Can any of the company-specific risk be diversified away by investing in both Elmos Semiconductor and Rockfire Resources 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 Elmos Semiconductor and Rockfire Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Elmos Semiconductor SE and Rockfire Resources plc, you can compare the effects of market volatilities on Elmos Semiconductor and Rockfire Resources 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 Elmos Semiconductor with a short position of Rockfire Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elmos Semiconductor and Rockfire Resources.

Diversification Opportunities for Elmos Semiconductor and Rockfire Resources

0.25

Correlation Coefficient

Elmos Semiconductor  Rockfire Resources

Modest diversification

The 3 months correlation between Elmos and Rockfire is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Elmos Semiconductor SE and Rockfire Resources plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rockfire Resources plc and Elmos Semiconductor 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 Elmos Semiconductor SE are associated (or correlated) with Rockfire Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rockfire Resources plc has no effect on the direction of Elmos Semiconductor i.e., Elmos Semiconductor and Rockfire Resources go up and down completely randomly.

Pair Corralation between Elmos Semiconductor and Rockfire Resources

Assuming the 90 days trading horizon Elmos Semiconductor is expected to generate 11.72 times less return on investment than Rockfire Resources. But when comparing it to its historical volatility, Elmos Semiconductor SE is 4.11 times less risky than Rockfire Resources. It trades about 0.04 of its potential returns per unit of risk. Rockfire Resources plc is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  11.00  in Rockfire Resources plc on September 17, 2024 and sell it today you would earn a total of  7.00  from holding Rockfire Resources plc or generate 63.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Elmos Semiconductor SE  vs.  Rockfire Resources plc

Elmos Semiconductor

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Elmos Semiconductor SE are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Elmos Semiconductor may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Rockfire Resources plc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rockfire Resources plc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Rockfire Resources unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Elmos Semiconductor and Rockfire Resources

The main advantage of trading using opposite Elmos Semiconductor and Rockfire Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elmos Semiconductor position performs unexpectedly, Rockfire Resources 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 Rockfire Resources will offset losses from the drop in Rockfire Resources' long position.

The idea behind Elmos Semiconductor SE and Rockfire Resources plc 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.

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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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.