Correlation Between DIVERSIFIED ROYALTY and STILLFRONT GRP

Can any of the company-specific risk be diversified away by investing in both DIVERSIFIED ROYALTY and STILLFRONT GRP 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 DIVERSIFIED ROYALTY and STILLFRONT GRP into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between DIVERSIFIED ROYALTY and STILLFRONT GRP AB, you can compare the effects of market volatilities on DIVERSIFIED ROYALTY and STILLFRONT GRP 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 DIVERSIFIED ROYALTY with a short position of STILLFRONT GRP. Check out your portfolio center. Please also check ongoing floating volatility patterns of DIVERSIFIED ROYALTY and STILLFRONT GRP.

Diversification Opportunities for DIVERSIFIED ROYALTY and STILLFRONT GRP

0.71

Correlation Coefficient

DIVERSIFIED ROYALTY  STILLFRONT GRP

Poor diversification

The 3 months correlation between DIVERSIFIED and STILLFRONT is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding DIVERSIFIED ROYALTY and STILLFRONT GRP AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STILLFRONT GRP AB and DIVERSIFIED ROYALTY 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 DIVERSIFIED ROYALTY are associated (or correlated) with STILLFRONT GRP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STILLFRONT GRP AB has no effect on the direction of DIVERSIFIED ROYALTY i.e., DIVERSIFIED ROYALTY and STILLFRONT GRP go up and down completely randomly.

Pair Corralation between DIVERSIFIED ROYALTY and STILLFRONT GRP

Assuming the 90 days horizon DIVERSIFIED ROYALTY is expected to generate 0.95 times more return on investment than STILLFRONT GRP. However, DIVERSIFIED ROYALTY is 1.05 times less risky than STILLFRONT GRP. It trades about -0.03 of its potential returns per unit of risk. STILLFRONT GRP AB is currently generating about -0.18 per unit of risk. If you would invest  188.00  in DIVERSIFIED ROYALTY on December 24, 2024 and sell it today you would lose (15.00) from holding DIVERSIFIED ROYALTY or give up 7.98% of portfolio value over 90 days.

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

DIVERSIFIED ROYALTY  vs.  STILLFRONT GRP AB

DIVERSIFIED ROYALTY

Risk-Adjusted Performance

Very Weak

Over the last 90 days DIVERSIFIED ROYALTY has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, DIVERSIFIED ROYALTY is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

STILLFRONT GRP AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days STILLFRONT GRP AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with DIVERSIFIED ROYALTY and STILLFRONT GRP

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

The idea behind DIVERSIFIED ROYALTY and STILLFRONT GRP AB 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.