Correlation Between Rocky Mountain and High Liner

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

By analyzing existing cross correlation between Rocky Mountain Liquor and High Liner Foods, you can compare the effects of market volatilities on Rocky Mountain and High Liner 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 Rocky Mountain with a short position of High Liner. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rocky Mountain and High Liner.

Diversification Opportunities for Rocky Mountain and High Liner

-0.62

Correlation Coefficient

Rocky Mountain  High Liner

Excellent diversification

The 3 months correlation between Rocky and High is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Rocky Mountain Liquor and High Liner Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Liner Foods and Rocky Mountain 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 Rocky Mountain Liquor are associated (or correlated) with High Liner. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of High Liner Foods has no effect on the direction of Rocky Mountain i.e., Rocky Mountain and High Liner go up and down completely randomly.

Pair Corralation between Rocky Mountain and High Liner

Assuming the 90 days horizon Rocky Mountain is expected to generate 1.49 times less return on investment than High Liner. In addition to that, Rocky Mountain is 1.91 times more volatile than High Liner Foods. It trades about 0.06 of its total potential returns per unit of risk. High Liner Foods is currently generating about 0.16 per unit of volatility. If you would invest  1,324  in High Liner Foods on September 3, 2024 and sell it today you would earn a total of  217.00  from holding High Liner Foods or generate 16.39% return on investment over 90 days.

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

Rocky Mountain Liquor  vs.  High Liner Foods

Rocky Mountain Liquor

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rocky Mountain Liquor are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Rocky Mountain may actually be approaching a critical reversion point that can send shares even higher in January 2025.

High Liner Foods

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in High Liner Foods are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, High Liner displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rocky Mountain and High Liner

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

The idea behind Rocky Mountain Liquor and High Liner Foods 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.