Correlation Between Rubicon Organics and Sparta Capital

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

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

Diversification Opportunities for Rubicon Organics and Sparta Capital

0.02

Correlation Coefficient

Rubicon Organics  Sparta Capital

Significant diversification

The 3 months correlation between Rubicon and Sparta is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Rubicon Organics and Sparta Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparta Capital and Rubicon Organics 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 Rubicon Organics are associated (or correlated) with Sparta Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparta Capital has no effect on the direction of Rubicon Organics i.e., Rubicon Organics and Sparta Capital go up and down completely randomly.

Pair Corralation between Rubicon Organics and Sparta Capital

Assuming the 90 days trading horizon Rubicon Organics is expected to under-perform the Sparta Capital. But the stock apears to be less risky and, when comparing its historical volatility, Rubicon Organics is 1.53 times less risky than Sparta Capital. The stock trades about -0.04 of its potential returns per unit of risk. The Sparta Capital is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2.00  in Sparta Capital on September 13, 2024 and sell it today you would earn a total of  0.00  from holding Sparta Capital or generate 0.0% return on investment over 90 days.

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

Rubicon Organics  vs.  Sparta Capital

Rubicon Organics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rubicon Organics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's primary indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Sparta Capital

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sparta Capital are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Sparta Capital showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rubicon Organics and Sparta Capital

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

The idea behind Rubicon Organics and Sparta Capital 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.