Correlation Between Russel Metals and Freehold Royalties
Can any of the company-specific risk be diversified away by investing in both Russel Metals and Freehold Royalties 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 Russel Metals and Freehold Royalties into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Russel Metals and Freehold Royalties, you can compare the effects of market volatilities on Russel Metals and Freehold Royalties 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 Russel Metals with a short position of Freehold Royalties. Check out your portfolio center. Please also check ongoing floating volatility patterns of Russel Metals and Freehold Royalties.
Diversification Opportunities for Russel Metals and Freehold Royalties
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Russel and Freehold is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Russel Metals and Freehold Royalties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freehold Royalties and Russel Metals 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 Russel Metals are associated (or correlated) with Freehold Royalties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freehold Royalties has no effect on the direction of Russel Metals i.e., Russel Metals and Freehold Royalties go up and down completely randomly.
Pair Corralation between Russel Metals and Freehold Royalties
Assuming the 90 days trading horizon Russel Metals is expected to generate 1.15 times more return on investment than Freehold Royalties. However, Russel Metals is 1.15 times more volatile than Freehold Royalties. It trades about 0.08 of its potential returns per unit of risk. Freehold Royalties is currently generating about 0.01 per unit of risk. If you would invest 2,649 in Russel Metals on August 30, 2024 and sell it today you would earn a total of 1,827 from holding Russel Metals or generate 68.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Russel Metals vs. Freehold Royalties
Performance |
| Timeline |
| Russel Metals |
| Freehold Royalties |
Russel Metals and Freehold Royalties Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Russel Metals and Freehold Royalties
The main advantage of trading using opposite Russel Metals and Freehold Royalties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Russel Metals position performs unexpectedly, Freehold Royalties 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 Freehold Royalties will offset losses from the drop in Freehold Royalties' long position.| Russel Metals vs. Finning International | Russel Metals vs. Transcontinental | Russel Metals vs. Toromont Industries | Russel Metals vs. IGM Financial |
| Freehold Royalties vs. Canadian Natural Resources | Freehold Royalties vs. Suncor Energy | Freehold Royalties vs. iShares Canadian HYBrid | Freehold Royalties vs. Altagas Cum Red |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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