Correlation Between Royal Bank and American Hotel
Can any of the company-specific risk be diversified away by investing in both Royal Bank and American Hotel 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 American Hotel 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 American Hotel Income, you can compare the effects of market volatilities on Royal Bank and American Hotel 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 American Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Bank and American Hotel.
Diversification Opportunities for Royal Bank and American Hotel
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Royal and American is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Royal Bank of and American Hotel Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Hotel Income 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 American Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Hotel Income has no effect on the direction of Royal Bank i.e., Royal Bank and American Hotel go up and down completely randomly.
Pair Corralation between Royal Bank and American Hotel
Assuming the 90 days trading horizon Royal Bank of is expected to generate 0.17 times more return on investment than American Hotel. However, Royal Bank of is 5.78 times less risky than American Hotel. It trades about 0.14 of its potential returns per unit of risk. American Hotel Income is currently generating about -0.41 per unit of risk. If you would invest 2,531 in Royal Bank of on September 4, 2024 and sell it today you would earn a total of 35.00 from holding Royal Bank of or generate 1.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Royal Bank of vs. American Hotel Income
Performance |
| Timeline |
| Royal Bank |
| American Hotel Income |
Royal Bank and American Hotel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Royal Bank and American Hotel
The main advantage of trading using opposite Royal Bank and American Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royal Bank position performs unexpectedly, American Hotel 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 American Hotel will offset losses from the drop in American Hotel's long position.| Royal Bank vs. Apple Inc CDR | Royal Bank vs. Microsoft Corp CDR | Royal Bank vs. Amazon CDR | Royal Bank vs. Alphabet Inc CDR |
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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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