Correlation Between Associated Capital and Royce Micro

Can any of the company-specific risk be diversified away by investing in both Associated Capital and Royce Micro 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 Associated Capital and Royce Micro into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Associated Capital Group and Royce Micro Cap, you can compare the effects of market volatilities on Associated Capital and Royce Micro 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 Associated Capital with a short position of Royce Micro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated Capital and Royce Micro.

Diversification Opportunities for Associated Capital and Royce Micro

0.64

Correlation Coefficient

Associated Capital  Royce Micro

Poor diversification

The 3 months correlation between Associated and Royce is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Associated Capital Group and Royce Micro Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royce Micro Cap and Associated Capital 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 Associated Capital Group are associated (or correlated) with Royce Micro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royce Micro Cap has no effect on the direction of Associated Capital i.e., Associated Capital and Royce Micro go up and down completely randomly.

Pair Corralation between Associated Capital and Royce Micro

Allowing for the 90-day total investment horizon Associated Capital Group is expected to generate 1.59 times more return on investment than Royce Micro. However, Associated Capital is 1.59 times more volatile than Royce Micro Cap. It trades about 0.13 of its potential returns per unit of risk. Royce Micro Cap is currently generating about 0.14 per unit of risk. If you would invest  3,143  in Associated Capital Group on September 2, 2024 and sell it today you would earn a total of  486.00  from holding Associated Capital Group or generate 15.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Associated Capital Group  vs.  Royce Micro Cap

Associated Capital

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Associated Capital Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental indicators, Associated Capital exhibited solid returns over the last few months and may actually be approaching a breakup point.

Royce Micro Cap

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Royce Micro Cap are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal primary indicators, Royce Micro may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Associated Capital and Royce Micro

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

The idea behind Associated Capital Group and Royce Micro Cap 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 CEOs Directory module to screen CEOs from public companies around the world.