Correlation Between Romcab SA and Palace SA

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

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

Diversification Opportunities for Romcab SA and Palace SA

0.0

Correlation Coefficient

Romcab SA  Palace SA

Pay attention - limited upside

The 3 months correlation between Romcab and Palace is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Romcab SA and Palace SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palace SA and Romcab SA 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 Romcab SA are associated (or correlated) with Palace SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Palace SA has no effect on the direction of Romcab SA i.e., Romcab SA and Palace SA go up and down completely randomly.

Pair Corralation between Romcab SA and Palace SA

If you would invest  2.08  in Romcab SA on December 21, 2024 and sell it today you would earn a total of  1.64  from holding Romcab SA or generate 78.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Romcab SA  vs.  Palace SA

Romcab SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Romcab SA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Romcab SA displayed solid returns over the last few months and may actually be approaching a breakup point.

Palace SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Palace SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, Palace SA is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Romcab SA and Palace SA

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

The idea behind Romcab SA and Palace SA 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.