Correlation Between Carlyle and Royalty Management

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

By analyzing existing cross correlation between Carlyle Group and Royalty Management Holding, you can compare the effects of market volatilities on Carlyle and Royalty Management 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 Carlyle with a short position of Royalty Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carlyle and Royalty Management.

Diversification Opportunities for Carlyle and Royalty Management

0.45

Correlation Coefficient

Carlyle  Royalty Management

Very weak diversification

The 3 months correlation between Carlyle and Royalty is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Carlyle Group and Royalty Management Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royalty Management and Carlyle 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 Carlyle Group are associated (or correlated) with Royalty Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royalty Management has no effect on the direction of Carlyle i.e., Carlyle and Royalty Management go up and down completely randomly.

Pair Corralation between Carlyle and Royalty Management

Allowing for the 90-day total investment horizon Carlyle Group is expected to under-perform the Royalty Management. But the stock apears to be less risky and, when comparing its historical volatility, Carlyle Group is 1.19 times less risky than Royalty Management. The stock trades about -0.05 of its potential returns per unit of risk. The Royalty Management Holding is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  101.00  in Royalty Management Holding on December 28, 2024 and sell it today you would earn a total of  10.00  from holding Royalty Management Holding or generate 9.9% return on investment over 90 days.

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

Carlyle Group  vs.  Royalty Management Holding

Carlyle Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Carlyle Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Royalty Management

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Royalty Management Holding are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady fundamental indicators, Royalty Management displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Carlyle and Royalty Management

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

The idea behind Carlyle Group and Royalty Management Holding 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..