Correlation Between City Sports and RB Food

Can any of the company-specific risk be diversified away by investing in both City Sports and RB Food 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 City Sports and RB Food into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between City Sports and and RB Food Supply, you can compare the effects of market volatilities on City Sports and RB Food 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 City Sports with a short position of RB Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of City Sports and RB Food.

Diversification Opportunities for City Sports and RB Food

0.24

Correlation Coefficient

City Sports  RB Food

Modest diversification

The 3 months correlation between City and RBF is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding City Sports and and RB Food Supply in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RB Food Supply and City Sports 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 City Sports and are associated (or correlated) with RB Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RB Food Supply has no effect on the direction of City Sports i.e., City Sports and RB Food go up and down completely randomly.

Pair Corralation between City Sports and RB Food

Assuming the 90 days trading horizon City Sports is expected to generate 1.31 times less return on investment than RB Food. But when comparing it to its historical volatility, City Sports and is 8.67 times less risky than RB Food. It trades about 0.99 of its potential returns per unit of risk. RB Food Supply is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  590.00  in RB Food Supply on September 24, 2024 and sell it today you would earn a total of  55.00  from holding RB Food Supply or generate 9.32% return on investment over 90 days.

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

City Sports and  vs.  RB Food Supply

City Sports

Risk-Adjusted Performance

36 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in City Sports and are ranked lower than 36 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, City Sports disclosed solid returns over the last few months and may actually be approaching a breakup point.

RB Food Supply

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RB Food Supply has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, RB Food is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with City Sports and RB Food

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

The idea behind City Sports and and RB Food Supply 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.

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.