Correlation Between Sparta Capital and Rubicon Organics

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

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

Diversification Opportunities for Sparta Capital and Rubicon Organics

0.09

Correlation Coefficient

Sparta Capital  Rubicon Organics

Significant diversification

The 3 months correlation between Sparta and Rubicon is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Sparta Capital and Rubicon Organics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rubicon Organics and Sparta Capital 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 Sparta Capital are associated (or correlated) with Rubicon Organics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rubicon Organics has no effect on the direction of Sparta Capital i.e., Sparta Capital and Rubicon Organics go up and down completely randomly.

Pair Corralation between Sparta Capital and Rubicon Organics

Assuming the 90 days horizon Sparta Capital is expected to generate 1.66 times more return on investment than Rubicon Organics. However, Sparta Capital is 1.66 times more volatile than Rubicon Organics. It trades about -0.02 of its potential returns per unit of risk. Rubicon Organics is currently generating about -0.03 per unit of risk. If you would invest  2.00  in Sparta Capital on September 14, 2024 and sell it today you would lose (0.50) from holding Sparta Capital or give up 25.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Sparta Capital  vs.  Rubicon Organics

Sparta Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sparta Capital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

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 latest abnormal performance, the Stock's primary indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Sparta Capital and Rubicon Organics

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

The idea behind Sparta Capital and Rubicon Organics 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.