Correlation Between Rockwood Realisation and Chocoladefabriken

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

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

Diversification Opportunities for Rockwood Realisation and Chocoladefabriken

-0.13

Correlation Coefficient

Rockwood Realisation  Chocoladefabriken

Good diversification

The 3 months correlation between Rockwood and Chocoladefabriken is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Rockwood Realisation PLC and Chocoladefabriken Lindt Spruen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chocoladefabriken Lindt and Rockwood Realisation 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 Rockwood Realisation PLC are associated (or correlated) with Chocoladefabriken. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chocoladefabriken Lindt has no effect on the direction of Rockwood Realisation i.e., Rockwood Realisation and Chocoladefabriken go up and down completely randomly.

Pair Corralation between Rockwood Realisation and Chocoladefabriken

Assuming the 90 days trading horizon Rockwood Realisation PLC is expected to generate 0.8 times more return on investment than Chocoladefabriken. However, Rockwood Realisation PLC is 1.26 times less risky than Chocoladefabriken. It trades about -0.01 of its potential returns per unit of risk. Chocoladefabriken Lindt Spruengli is currently generating about -0.17 per unit of risk. If you would invest  26,300  in Rockwood Realisation PLC on September 23, 2024 and sell it today you would lose (100.00) from holding Rockwood Realisation PLC or give up 0.38% of portfolio value over 90 days.

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

Rockwood Realisation PLC  vs.  Chocoladefabriken Lindt Spruen

Rockwood Realisation PLC

Risk-Adjusted Performance

0 of 100

Very Weak

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

Chocoladefabriken Lindt

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chocoladefabriken Lindt Spruengli has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Rockwood Realisation and Chocoladefabriken

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

The idea behind Rockwood Realisation PLC and Chocoladefabriken Lindt Spruengli 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.