Correlation Between Rocky Brands and Fernhill Beverage

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

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

Diversification Opportunities for Rocky Brands and Fernhill Beverage

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Correlation Coefficient

Rocky Brands  Fernhill Beverage

Pay attention - limited upside

The 3 months correlation between Rocky and Fernhill is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Rocky Brands and Fernhill Beverage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fernhill Beverage and Rocky Brands 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 Rocky Brands are associated (or correlated) with Fernhill Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fernhill Beverage has no effect on the direction of Rocky Brands i.e., Rocky Brands and Fernhill Beverage go up and down completely randomly.

Pair Corralation between Rocky Brands and Fernhill Beverage

Given the investment horizon of 90 days Rocky Brands is expected to generate 0.1 times more return on investment than Fernhill Beverage. However, Rocky Brands is 10.08 times less risky than Fernhill Beverage. It trades about 0.03 of its potential returns per unit of risk. Fernhill Beverage is currently generating about -0.22 per unit of risk. If you would invest  2,253  in Rocky Brands on September 25, 2024 and sell it today you would earn a total of  25.00  from holding Rocky Brands or generate 1.11% return on investment over 90 days.

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

Rocky Brands  vs.  Fernhill Beverage

Rocky Brands

Risk-Adjusted Performance

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Very Weak

Over the last 90 days Rocky Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's forward-looking signals remain fairly 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.

Fernhill Beverage

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Rocky Brands and Fernhill Beverage

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

The idea behind Rocky Brands and Fernhill Beverage 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.