Correlation Between RB Food and GFPT Public

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

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

Diversification Opportunities for RB Food and GFPT Public

0.22

Correlation Coefficient

RB Food  GFPT Public

Modest diversification

The 3 months correlation between RBF and GFPT is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding RB Food Supply and GFPT Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GFPT Public and RB Food 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 RB Food Supply are associated (or correlated) with GFPT Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GFPT Public has no effect on the direction of RB Food i.e., RB Food and GFPT Public go up and down completely randomly.

Pair Corralation between RB Food and GFPT Public

Assuming the 90 days trading horizon RB Food Supply is expected to generate 2.05 times more return on investment than GFPT Public. However, RB Food is 2.05 times more volatile than GFPT Public. It trades about 0.08 of its potential returns per unit of risk. GFPT Public is currently generating about -0.13 per unit of risk. If you would invest  625.00  in RB Food Supply on September 12, 2024 and sell it today you would earn a total of  75.00  from holding RB Food Supply or generate 12.0% return on investment over 90 days.

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

RB Food Supply  vs.  GFPT Public

RB Food Supply

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in RB Food Supply are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting technical and fundamental indicators, RB Food disclosed solid returns over the last few months and may actually be approaching a breakup point.

GFPT Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GFPT Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with RB Food and GFPT Public

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

The idea behind RB Food Supply and GFPT Public 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.