Correlation Between RH and Sportsmans

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

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

Diversification Opportunities for RH and Sportsmans

-0.3

Correlation Coefficient

RH  Sportsmans

Very good diversification

The 3 months correlation between RH and Sportsmans is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding RH and Sportsmans in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sportsmans and RH 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 RH are associated (or correlated) with Sportsmans. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sportsmans has no effect on the direction of RH i.e., RH and Sportsmans go up and down completely randomly.

Pair Corralation between RH and Sportsmans

Allowing for the 90-day total investment horizon RH is expected to generate 0.41 times more return on investment than Sportsmans. However, RH is 2.44 times less risky than Sportsmans. It trades about 0.33 of its potential returns per unit of risk. Sportsmans is currently generating about 0.13 per unit of risk. If you would invest  32,994  in RH on September 12, 2024 and sell it today you would earn a total of  6,901  from holding RH or generate 20.92% return on investment over 90 days.

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

RH  vs.  Sportsmans

RH

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RH are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain technical indicators, RH demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Sportsmans

Risk-Adjusted Performance

3 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sportsmans are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Sportsmans demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with RH and Sportsmans

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

The idea behind RH and Sportsmans 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.