Correlation Between Royal Canadian and SIR Royalty
Can any of the company-specific risk be diversified away by investing in both Royal Canadian and SIR Royalty 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 Royal Canadian and SIR Royalty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Royal Canadian Mint and SIR Royalty Income, you can compare the effects of market volatilities on Royal Canadian and SIR Royalty 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 Royal Canadian with a short position of SIR Royalty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Canadian and SIR Royalty.
Diversification Opportunities for Royal Canadian and SIR Royalty
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Royal and SIR is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Royal Canadian Mint and SIR Royalty Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIR Royalty Income and Royal Canadian 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 Royal Canadian Mint are associated (or correlated) with SIR Royalty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIR Royalty Income has no effect on the direction of Royal Canadian i.e., Royal Canadian and SIR Royalty go up and down completely randomly.
Pair Corralation between Royal Canadian and SIR Royalty
Assuming the 90 days trading horizon Royal Canadian Mint is expected to generate 0.75 times more return on investment than SIR Royalty. However, Royal Canadian Mint is 1.33 times less risky than SIR Royalty. It trades about 0.13 of its potential returns per unit of risk. SIR Royalty Income is currently generating about -0.04 per unit of risk. If you would invest 2,738 in Royal Canadian Mint on September 1, 2024 and sell it today you would earn a total of 1,084 from holding Royal Canadian Mint or generate 39.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Royal Canadian Mint vs. SIR Royalty Income
Performance |
| Timeline |
| Royal Canadian Mint |
| SIR Royalty Income |
Royal Canadian and SIR Royalty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Royal Canadian and SIR Royalty
The main advantage of trading using opposite Royal Canadian and SIR Royalty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royal Canadian position performs unexpectedly, SIR Royalty 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 SIR Royalty will offset losses from the drop in SIR Royalty's long position.| Royal Canadian vs. Royal Canadian Mint | Royal Canadian vs. iShares Gold Bullion | Royal Canadian vs. Sprott Physical Gold | Royal Canadian vs. Purpose Gold Bullion |
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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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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