Correlation Between Royal Bank and Hampton Financial
Can any of the company-specific risk be diversified away by investing in both Royal Bank and Hampton Financial 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 Hampton Financial 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 Hampton Financial Corp, you can compare the effects of market volatilities on Royal Bank and Hampton Financial 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 Hampton Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Bank and Hampton Financial.
Diversification Opportunities for Royal Bank and Hampton Financial
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Royal and Hampton is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Royal Bank of and Hampton Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hampton Financial Corp 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 Hampton Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hampton Financial Corp has no effect on the direction of Royal Bank i.e., Royal Bank and Hampton Financial go up and down completely randomly.
Pair Corralation between Royal Bank and Hampton Financial
Assuming the 90 days trading horizon Royal Bank of is expected to generate 0.31 times more return on investment than Hampton Financial. However, Royal Bank of is 3.25 times less risky than Hampton Financial. It trades about 0.04 of its potential returns per unit of risk. Hampton Financial Corp is currently generating about -0.02 per unit of risk. If you would invest 2,115 in Royal Bank of on October 26, 2024 and sell it today you would earn a total of 351.00 from holding Royal Bank of or generate 16.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Royal Bank of vs. Hampton Financial Corp
Performance |
| Timeline |
| Royal Bank |
| Hampton Financial Corp |
Royal Bank and Hampton Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Royal Bank and Hampton Financial
The main advantage of trading using opposite Royal Bank and Hampton Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royal Bank position performs unexpectedly, Hampton Financial 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 Hampton Financial will offset losses from the drop in Hampton Financial's long position.| Royal Bank vs. Computer Modelling Group | Royal Bank vs. Olympia Financial Group | Royal Bank vs. Laurentian Bank | Royal Bank vs. IGM Financial |
| Hampton Financial vs. Berkshire Hathaway CDR | Hampton Financial vs. Microsoft Corp CDR | Hampton Financial vs. Apple Inc CDR | Hampton Financial vs. Alphabet Inc CDR |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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