Correlation Between Royal Bank and Spire Healthcare

Can any of the company-specific risk be diversified away by investing in both Royal Bank and Spire Healthcare 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 Spire Healthcare 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 Spire Healthcare Group, you can compare the effects of market volatilities on Royal Bank and Spire Healthcare 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 Spire Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Bank and Spire Healthcare.

Diversification Opportunities for Royal Bank and Spire Healthcare

-0.37

Correlation Coefficient

Royal Bank  Spire Healthcare

Very good diversification

The 3 months correlation between Royal and Spire is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Royal Bank of and Spire Healthcare Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spire Healthcare 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 Spire Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spire Healthcare has no effect on the direction of Royal Bank i.e., Royal Bank and Spire Healthcare go up and down completely randomly.

Pair Corralation between Royal Bank and Spire Healthcare

Assuming the 90 days trading horizon Royal Bank of is expected to under-perform the Spire Healthcare. But the stock apears to be less risky and, when comparing its historical volatility, Royal Bank of is 1.78 times less risky than Spire Healthcare. The stock trades about -0.04 of its potential returns per unit of risk. The Spire Healthcare Group is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  22,350  in Spire Healthcare Group on October 20, 2024 and sell it today you would earn a total of  1,150  from holding Spire Healthcare Group or generate 5.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Royal Bank of  vs.  Spire Healthcare Group

Royal Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Royal Bank of has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Royal Bank is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Spire Healthcare

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Spire Healthcare Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Spire Healthcare is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Royal Bank and Spire Healthcare

The main advantage of trading using opposite Royal Bank and Spire Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royal Bank position performs unexpectedly, Spire Healthcare 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 Spire Healthcare will offset losses from the drop in Spire Healthcare's long position.

The idea behind Royal Bank of and Spire Healthcare Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.