Correlation Between Flaherty Crumrine and Royce Value

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

By analyzing existing cross correlation between Flaherty Crumrine Preferred and Royce Value Closed, you can compare the effects of market volatilities on Flaherty Crumrine and Royce Value 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 Flaherty Crumrine with a short position of Royce Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Flaherty Crumrine and Royce Value.

Diversification Opportunities for Flaherty Crumrine and Royce Value

-0.29

Correlation Coefficient

Flaherty Crumrine  Royce Value

Very good diversification

The 3 months correlation between Flaherty and Royce is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Flaherty Crumrine Preferred and Royce Value Closed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royce Value Closed and Flaherty Crumrine 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 Flaherty Crumrine Preferred are associated (or correlated) with Royce Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royce Value Closed has no effect on the direction of Flaherty Crumrine i.e., Flaherty Crumrine and Royce Value go up and down completely randomly.

Pair Corralation between Flaherty Crumrine and Royce Value

Considering the 90-day investment horizon Flaherty Crumrine Preferred is expected to generate 0.51 times more return on investment than Royce Value. However, Flaherty Crumrine Preferred is 1.96 times less risky than Royce Value. It trades about 0.17 of its potential returns per unit of risk. Royce Value Closed is currently generating about -0.1 per unit of risk. If you would invest  1,517  in Flaherty Crumrine Preferred on December 28, 2024 and sell it today you would earn a total of  80.00  from holding Flaherty Crumrine Preferred or generate 5.27% return on investment over 90 days.

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

Flaherty Crumrine Preferred  vs.  Royce Value Closed

Flaherty Crumrine

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Flaherty Crumrine Preferred are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather sound technical and fundamental indicators, Flaherty Crumrine is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Royce Value Closed

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Flaherty Crumrine and Royce Value

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

The idea behind Flaherty Crumrine Preferred and Royce Value Closed 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..