Correlation Between Sportsmans and RH

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

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

Diversification Opportunities for Sportsmans and RH

0.08

Correlation Coefficient

Sportsmans  RH

Significant diversification

The 3 months correlation between Sportsmans and RH is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Sportsmans and RH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RH and Sportsmans 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 Sportsmans are associated (or correlated) with RH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RH has no effect on the direction of Sportsmans i.e., Sportsmans and RH go up and down completely randomly.

Pair Corralation between Sportsmans and RH

Given the investment horizon of 90 days Sportsmans is expected to under-perform the RH. In addition to that, Sportsmans is 1.24 times more volatile than RH. It trades about -0.05 of its total potential returns per unit of risk. RH is currently generating about 0.04 per unit of volatility. If you would invest  25,990  in RH on September 5, 2024 and sell it today you would earn a total of  11,920  from holding RH or generate 45.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Sportsmans  vs.  RH

Sportsmans

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Sportsmans has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Sportsmans is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

RH

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RH are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain technical indicators, RH demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sportsmans and RH

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

The idea behind Sportsmans and RH 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.