Correlation Between CapitaLand Investment and Royalty Management

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

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

Diversification Opportunities for CapitaLand Investment and Royalty Management

0.28

Correlation Coefficient

CapitaLand Investment  Royalty Management

Modest diversification

The 3 months correlation between CapitaLand and Royalty is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding CapitaLand Investment Limited and Royalty Management Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royalty Management and CapitaLand Investment 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 CapitaLand Investment Limited 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 CapitaLand Investment i.e., CapitaLand Investment and Royalty Management go up and down completely randomly.

Pair Corralation between CapitaLand Investment and Royalty Management

Assuming the 90 days horizon CapitaLand Investment Limited is expected to under-perform the Royalty Management. But the pink sheet apears to be less risky and, when comparing its historical volatility, CapitaLand Investment Limited is 1.51 times less risky than Royalty Management. The pink sheet trades about -0.13 of its potential returns per unit of risk. The Royalty Management Holding is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  101.00  in Royalty Management Holding on December 30, 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	Very Weak
Accuracy	100.0%
Values	Daily Returns

CapitaLand Investment Limited  vs.  Royalty Management Holding

CapitaLand Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days CapitaLand Investment Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's essential 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.

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 fragile fundamental indicators, Royalty Management may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with CapitaLand Investment and Royalty Management

The main advantage of trading using opposite CapitaLand Investment and Royalty Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CapitaLand Investment 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 CapitaLand Investment Limited 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.