Correlation Between Royal Bank and Hammond Power
Can any of the company-specific risk be diversified away by investing in both Royal Bank and Hammond Power 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 Bank and Hammond Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Royal Bank of and Hammond Power Solutions, you can compare the effects of market volatilities on Royal Bank and Hammond Power 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 Bank with a short position of Hammond Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Bank and Hammond Power.
Diversification Opportunities for Royal Bank and Hammond Power
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Royal and Hammond is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Royal Bank of and Hammond Power Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hammond Power Solutions and Royal Bank 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 Bank of are associated (or correlated) with Hammond Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hammond Power Solutions has no effect on the direction of Royal Bank i.e., Royal Bank and Hammond Power go up and down completely randomly.
Pair Corralation between Royal Bank and Hammond Power
Assuming the 90 days trading horizon Royal Bank of is expected to generate 0.11 times more return on investment than Hammond Power. However, Royal Bank of is 9.04 times less risky than Hammond Power. It trades about 0.06 of its potential returns per unit of risk. Hammond Power Solutions is currently generating about -0.06 per unit of risk. If you would invest 2,455 in Royal Bank of on October 28, 2024 and sell it today you would earn a total of 8.00 from holding Royal Bank of or generate 0.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Royal Bank of vs. Hammond Power Solutions
Performance |
| Timeline |
| Royal Bank |
| Hammond Power Solutions |
Royal Bank and Hammond Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Royal Bank and Hammond Power
The main advantage of trading using opposite Royal Bank and Hammond Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royal Bank position performs unexpectedly, Hammond Power 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 Hammond Power will offset losses from the drop in Hammond Power's long position.| Royal Bank vs. National Bank of | Royal Bank vs. Olympia Financial Group | Royal Bank vs. Laurentian Bank | Royal Bank vs. HOME DEPOT CDR |
| Hammond Power vs. Hammond Manufacturing | Hammond Power vs. Firan Technology Group | Hammond Power vs. Supremex | Hammond Power vs. Geodrill Limited |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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