Correlation Between Goodfood Market and Rocky Mountain

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

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

Diversification Opportunities for Goodfood Market and Rocky Mountain

-0.54

Correlation Coefficient

Goodfood Market  Rocky Mountain

Excellent diversification

The 3 months correlation between Goodfood and Rocky is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Goodfood Market Corp and Rocky Mountain Liquor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rocky Mountain Liquor and Goodfood Market 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 Goodfood Market Corp are associated (or correlated) with Rocky Mountain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rocky Mountain Liquor has no effect on the direction of Goodfood Market i.e., Goodfood Market and Rocky Mountain go up and down completely randomly.

Pair Corralation between Goodfood Market and Rocky Mountain

Assuming the 90 days trading horizon Goodfood Market Corp is expected to generate 0.71 times more return on investment than Rocky Mountain. However, Goodfood Market Corp is 1.41 times less risky than Rocky Mountain. It trades about -0.17 of its potential returns per unit of risk. Rocky Mountain Liquor is currently generating about -0.32 per unit of risk. If you would invest  46.00  in Goodfood Market Corp on October 1, 2024 and sell it today you would lose (6.00) from holding Goodfood Market Corp or give up 13.04% of portfolio value over 90 days.

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

Goodfood Market Corp  vs.  Rocky Mountain Liquor

Goodfood Market Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Goodfood Market Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Goodfood Market displayed solid returns over the last few months and may actually be approaching a breakup point.

Rocky Mountain Liquor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rocky Mountain Liquor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Goodfood Market and Rocky Mountain

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

The idea behind Goodfood Market Corp and Rocky Mountain Liquor 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.