Correlation Between Rocky Mountain and Helios Fairfax

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

Diversification Opportunities for Rocky Mountain and Helios Fairfax

-0.28

Correlation Coefficient

Rocky Mountain  Helios Fairfax

Very good diversification

The 3 months correlation between Rocky and Helios is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Rocky Mountain Liquor and Helios Fairfax Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Helios Fairfax Partners 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 Helios Fairfax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Helios Fairfax Partners has no effect on the direction of Rocky Mountain i.e., Rocky Mountain and Helios Fairfax go up and down completely randomly.

Pair Corralation between Rocky Mountain and Helios Fairfax

Assuming the 90 days horizon Rocky Mountain Liquor is expected to generate 1.4 times more return on investment than Helios Fairfax. However, Rocky Mountain is 1.4 times more volatile than Helios Fairfax Partners. It trades about 0.01 of its potential returns per unit of risk. Helios Fairfax Partners is currently generating about 0.02 per unit of risk. If you would invest  14.00  in Rocky Mountain Liquor on September 18, 2024 and sell it today you would lose (4.00) from holding Rocky Mountain Liquor or give up 28.57% of portfolio value over 90 days.

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

Rocky Mountain Liquor  vs.  Helios Fairfax Partners

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.

Helios Fairfax Partners

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with Rocky Mountain and Helios Fairfax

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

The idea behind Rocky Mountain Liquor and Helios Fairfax Partners 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.