Correlation Between Rocky Mountain and KDA

Can any of the company-specific risk be diversified away by investing in both Rocky Mountain and KDA 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 KDA 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 KDA Group, you can compare the effects of market volatilities on Rocky Mountain and KDA 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 KDA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rocky Mountain and KDA.

Diversification Opportunities for Rocky Mountain and KDA

0.07

Correlation Coefficient

Rocky Mountain  KDA

Significant diversification

The 3 months correlation between Rocky and KDA is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Rocky Mountain Liquor and KDA Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KDA Group 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 KDA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KDA Group has no effect on the direction of Rocky Mountain i.e., Rocky Mountain and KDA go up and down completely randomly.

Pair Corralation between Rocky Mountain and KDA

Assuming the 90 days horizon Rocky Mountain Liquor is expected to under-perform the KDA. But the stock apears to be less risky and, when comparing its historical volatility, Rocky Mountain Liquor is 1.49 times less risky than KDA. The stock trades about -0.08 of its potential returns per unit of risk. The KDA Group is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  28.00  in KDA Group on September 15, 2024 and sell it today you would earn a total of  0.00  from holding KDA Group 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

Rocky Mountain Liquor  vs.  KDA Group

Rocky Mountain Liquor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rocky Mountain Liquor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic 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.

KDA Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KDA Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, KDA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Rocky Mountain and KDA

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

The idea behind Rocky Mountain Liquor and KDA 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.