Correlation Between Rockfire Resources and Dalata Hotel

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

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

Diversification Opportunities for Rockfire Resources and Dalata Hotel

-0.05

Correlation Coefficient

Rockfire Resources  Dalata Hotel

Good diversification

The 3 months correlation between Rockfire and Dalata is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Rockfire Resources plc and Dalata Hotel Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dalata Hotel Group and Rockfire Resources 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 Rockfire Resources plc are associated (or correlated) with Dalata Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dalata Hotel Group has no effect on the direction of Rockfire Resources i.e., Rockfire Resources and Dalata Hotel go up and down completely randomly.

Pair Corralation between Rockfire Resources and Dalata Hotel

Assuming the 90 days trading horizon Rockfire Resources plc is expected to under-perform the Dalata Hotel. In addition to that, Rockfire Resources is 1.99 times more volatile than Dalata Hotel Group. It trades about -0.21 of its total potential returns per unit of risk. Dalata Hotel Group is currently generating about 0.04 per unit of volatility. If you would invest  35,870  in Dalata Hotel Group on September 4, 2024 and sell it today you would earn a total of  1,630  from holding Dalata Hotel Group or generate 4.54% return on investment over 90 days.

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

Rockfire Resources plc  vs.  Dalata Hotel Group

Rockfire Resources plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rockfire Resources plc 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 basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Dalata Hotel Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dalata Hotel Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Dalata Hotel is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Rockfire Resources and Dalata Hotel

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

The idea behind Rockfire Resources plc and Dalata Hotel Group 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.