Correlation Between Rockridge Resources and South Star

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

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

Diversification Opportunities for Rockridge Resources and South Star

0.06

Correlation Coefficient

Rockridge Resources  South Star

Significant diversification

The 3 months correlation between Rockridge and South is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Rockridge Resources and South Star Battery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on South Star Battery and Rockridge 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 Rockridge Resources are associated (or correlated) with South Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of South Star Battery has no effect on the direction of Rockridge Resources i.e., Rockridge Resources and South Star go up and down completely randomly.

Pair Corralation between Rockridge Resources and South Star

Assuming the 90 days horizon Rockridge Resources is expected to generate 2.22 times more return on investment than South Star. However, Rockridge Resources is 2.22 times more volatile than South Star Battery. It trades about 0.09 of its potential returns per unit of risk. South Star Battery is currently generating about -0.04 per unit of risk. If you would invest  0.89  in Rockridge Resources on September 12, 2024 and sell it today you would earn a total of  0.31  from holding Rockridge Resources or generate 34.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Rockridge Resources  vs.  South Star Battery

Rockridge Resources

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Rockridge Resources are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Rockridge Resources reported solid returns over the last few months and may actually be approaching a breakup point.

South Star Battery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days South Star Battery has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's fundamental drivers remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Rockridge Resources and South Star

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

The idea behind Rockridge Resources and South Star Battery 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.