Correlation Between Derichebourg and Roctool

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

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

Diversification Opportunities for Derichebourg and Roctool

0.27

Correlation Coefficient

Derichebourg  Roctool

Modest diversification

The 3 months correlation between Derichebourg and Roctool is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Derichebourg and Roctool in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roctool and Derichebourg 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 Derichebourg are associated (or correlated) with Roctool. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roctool has no effect on the direction of Derichebourg i.e., Derichebourg and Roctool go up and down completely randomly.

Pair Corralation between Derichebourg and Roctool

Assuming the 90 days trading horizon Derichebourg is expected to under-perform the Roctool. But the stock apears to be less risky and, when comparing its historical volatility, Derichebourg is 3.28 times less risky than Roctool. The stock trades about -0.12 of its potential returns per unit of risk. The Roctool is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  52.00  in Roctool on September 5, 2024 and sell it today you would lose (13.00) from holding Roctool or give up 25.0% of portfolio value over 90 days.

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

Derichebourg  vs.  Roctool

Derichebourg

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Derichebourg has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Roctool

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Roctool has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Derichebourg and Roctool

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

The idea behind Derichebourg and Roctool 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.