Correlation Between Polished and RPM International

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Can any of the company-specific risk be diversified away by investing in both Polished and RPM International 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 Polished and RPM International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Polished and RPM International, you can compare the effects of market volatilities on Polished and RPM International 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 Polished with a short position of RPM International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Polished and RPM International.

Diversification Opportunities for Polished and RPM International

-0.82
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Polished and RPM is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Polished and RPM International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RPM International and Polished 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 Polished are associated (or correlated) with RPM International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RPM International has no effect on the direction of Polished i.e., Polished and RPM International go up and down completely randomly.

Pair Corralation between Polished and RPM International

Considering the 90-day investment horizon Polished is expected to generate 85.32 times more return on investment than RPM International. However, Polished is 85.32 times more volatile than RPM International. It trades about 0.1 of its potential returns per unit of risk. RPM International is currently generating about 0.31 per unit of risk. If you would invest  180.00  in Polished on December 29, 2023 and sell it today you would lose (177.90) from holding Polished or give up 98.83% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Polished  vs.  RPM International

 Performance 
       Timeline  
Polished 

Risk-Adjusted Performance

3 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Polished are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Polished disclosed solid returns over the last few months and may actually be approaching a breakup point.
RPM International 

Risk-Adjusted Performance

9 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in RPM International are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, RPM International may actually be approaching a critical reversion point that can send shares even higher in April 2024.

Polished and RPM International Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Polished and RPM International

The main advantage of trading using opposite Polished and RPM International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Polished position performs unexpectedly, RPM International 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 RPM International will offset losses from the drop in RPM International's long position.
The idea behind Polished and RPM International 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.
Check out your portfolio center.
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

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