Correlation Between Freehold Royalties and Exchange Income

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

By analyzing existing cross correlation between Freehold Royalties and Exchange Income, you can compare the effects of market volatilities on Freehold Royalties and Exchange Income 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 Freehold Royalties with a short position of Exchange Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freehold Royalties and Exchange Income.

Diversification Opportunities for Freehold Royalties and Exchange Income

0.42

Correlation Coefficient

Freehold Royalties  Exchange Income

Very weak diversification

The 3 months correlation between Freehold and Exchange is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Freehold Royalties and Exchange Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exchange Income and Freehold Royalties 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 Freehold Royalties are associated (or correlated) with Exchange Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exchange Income has no effect on the direction of Freehold Royalties i.e., Freehold Royalties and Exchange Income go up and down completely randomly.

Pair Corralation between Freehold Royalties and Exchange Income

Assuming the 90 days trading horizon Freehold Royalties is expected to generate 0.9 times more return on investment than Exchange Income. However, Freehold Royalties is 1.12 times less risky than Exchange Income. It trades about 0.05 of its potential returns per unit of risk. Exchange Income is currently generating about -0.19 per unit of risk. If you would invest  1,243  in Freehold Royalties on December 29, 2024 and sell it today you would earn a total of  42.00  from holding Freehold Royalties or generate 3.38% return on investment over 90 days.

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

Freehold Royalties  vs.  Exchange Income

Freehold Royalties

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Freehold Royalties are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Freehold Royalties is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Exchange Income

Risk-Adjusted Performance

Very Weak

Over the last 90 days Exchange Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Freehold Royalties and Exchange Income

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

The idea behind Freehold Royalties and Exchange Income 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..