Correlation Between Royce Value and XAI Octagon
Can any of the company-specific risk be diversified away by investing in both Royce Value and XAI Octagon 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 Royce Value and XAI Octagon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Royce Value Closed and XAI Octagon Floating, you can compare the effects of market volatilities on Royce Value and XAI Octagon 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 Royce Value with a short position of XAI Octagon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royce Value and XAI Octagon.
Diversification Opportunities for Royce Value and XAI Octagon
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Royce and XAI is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Royce Value Closed and XAI Octagon Floating in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XAI Octagon Floating and Royce Value 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 Royce Value Closed are associated (or correlated) with XAI Octagon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XAI Octagon Floating has no effect on the direction of Royce Value i.e., Royce Value and XAI Octagon go up and down completely randomly.
Pair Corralation between Royce Value and XAI Octagon
Considering the 90-day investment horizon Royce Value Closed is expected to generate 2.03 times more return on investment than XAI Octagon. However, Royce Value is 2.03 times more volatile than XAI Octagon Floating. It trades about 0.1 of its potential returns per unit of risk. XAI Octagon Floating is currently generating about 0.11 per unit of risk. If you would invest 1,261 in Royce Value Closed on September 4, 2024 and sell it today you would earn a total of 418.00 from holding Royce Value Closed or generate 33.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Royce Value Closed vs. XAI Octagon Floating
Performance |
| Timeline |
| Royce Value Closed |
| XAI Octagon Floating |
Royce Value and XAI Octagon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Royce Value and XAI Octagon
The main advantage of trading using opposite Royce Value and XAI Octagon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royce Value position performs unexpectedly, XAI Octagon 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 XAI Octagon will offset losses from the drop in XAI Octagon's long position.| Royce Value vs. Royce Global Value | Royce Value vs. Nuveen Municipal Credit | Royce Value vs. BlackRock Capital Allocation | Royce Value vs. DWS Municipal Income |
| XAI Octagon vs. Oxford Lane Capital | XAI Octagon vs. Capital Southwest | XAI Octagon vs. Cornerstone Strategic Return | XAI Octagon vs. Cornerstone Strategic Value |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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