Correlation Between RPM International and Perimeter Solutions

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

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

Diversification Opportunities for RPM International and Perimeter Solutions

0.63

Correlation Coefficient

RPM International  Perimeter Solutions

Poor diversification

The 3 months correlation between RPM and Perimeter is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding RPM International and Perimeter Solutions SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perimeter Solutions and RPM International 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 RPM International are associated (or correlated) with Perimeter Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Perimeter Solutions has no effect on the direction of RPM International i.e., RPM International and Perimeter Solutions go up and down completely randomly.

Pair Corralation between RPM International and Perimeter Solutions

Considering the 90-day investment horizon RPM International is expected to generate 0.5 times more return on investment than Perimeter Solutions. However, RPM International is 2.01 times less risky than Perimeter Solutions. It trades about 0.24 of its potential returns per unit of risk. Perimeter Solutions SA is currently generating about -0.04 per unit of risk. If you would invest  12,054  in RPM International on August 30, 2024 and sell it today you would earn a total of  1,831  from holding RPM International or generate 15.19% return on investment over 90 days.

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

RPM International  vs.  Perimeter Solutions SA

RPM International

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in RPM International are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, RPM International displayed solid returns over the last few months and may actually be approaching a breakup point.

Perimeter Solutions

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Perimeter Solutions SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Perimeter Solutions may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with RPM International and Perimeter Solutions

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

The idea behind RPM International and Perimeter Solutions SA 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.