Correlation Between Brimstone Investment and RCL Foods

Can any of the company-specific risk be diversified away by investing in both Brimstone Investment and RCL Foods 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 Brimstone Investment and RCL Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Brimstone Investment and RCL Foods, you can compare the effects of market volatilities on Brimstone Investment and RCL Foods 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 Brimstone Investment with a short position of RCL Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brimstone Investment and RCL Foods.

Diversification Opportunities for Brimstone Investment and RCL Foods

0.01

Correlation Coefficient

Brimstone Investment  RCL Foods

Significant diversification

The 3 months correlation between Brimstone and RCL is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Brimstone Investment and RCL Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RCL Foods and Brimstone Investment 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 Brimstone Investment are associated (or correlated) with RCL Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RCL Foods has no effect on the direction of Brimstone Investment i.e., Brimstone Investment and RCL Foods go up and down completely randomly.

Pair Corralation between Brimstone Investment and RCL Foods

Assuming the 90 days trading horizon Brimstone Investment is expected to generate 5.63 times more return on investment than RCL Foods. However, Brimstone Investment is 5.63 times more volatile than RCL Foods. It trades about 0.02 of its potential returns per unit of risk. RCL Foods is currently generating about 0.0 per unit of risk. If you would invest  58,000  in Brimstone Investment on September 1, 2024 and sell it today you would lose (600.00) from holding Brimstone Investment or give up 1.03% of portfolio value over 90 days.

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

Brimstone Investment  vs.  RCL Foods

Brimstone Investment

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Brimstone Investment are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Brimstone Investment may actually be approaching a critical reversion point that can send shares even higher in December 2024.

RCL Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RCL Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, RCL Foods is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Brimstone Investment and RCL Foods

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

The idea behind Brimstone Investment and RCL Foods 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.