Correlation Between Somnigroup International and RCL Foods

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

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

Diversification Opportunities for Somnigroup International and RCL Foods

-0.63

Correlation Coefficient

Somnigroup International  RCL Foods

Excellent diversification

The 3 months correlation between Somnigroup and RCL is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Somnigroup International and RCL Foods Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RCL Foods Limited and Somnigroup International 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 Somnigroup International are associated (or correlated) with RCL Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RCL Foods Limited has no effect on the direction of Somnigroup International i.e., Somnigroup International and RCL Foods go up and down completely randomly.

Pair Corralation between Somnigroup International and RCL Foods

Considering the 90-day investment horizon Somnigroup International is expected to generate 1.25 times more return on investment than RCL Foods. However, Somnigroup International is 1.25 times more volatile than RCL Foods Limited. It trades about 0.18 of its potential returns per unit of risk. RCL Foods Limited is currently generating about -0.13 per unit of risk. If you would invest  7,174  in Somnigroup International on July 3, 2025 and sell it today you would earn a total of  1,259  from holding Somnigroup International or generate 17.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Somnigroup International  vs.  RCL Foods Limited

Somnigroup International

Risk-Adjusted Performance

Good

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

RCL Foods Limited

Risk-Adjusted Performance

Weakest

Over the last 90 days RCL Foods Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Somnigroup International and RCL Foods

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

The idea behind Somnigroup International and RCL Foods Limited 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.