Correlation Between Netcapital and Scully Royalty

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

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

Diversification Opportunities for Netcapital and Scully Royalty

0.06

Correlation Coefficient

Netcapital  Scully Royalty

Significant diversification

The 3 months correlation between Netcapital and Scully is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Netcapital and Scully Royalty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scully Royalty and Netcapital 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 Netcapital are associated (or correlated) with Scully Royalty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scully Royalty has no effect on the direction of Netcapital i.e., Netcapital and Scully Royalty go up and down completely randomly.

Pair Corralation between Netcapital and Scully Royalty

Given the investment horizon of 90 days Netcapital is expected to under-perform the Scully Royalty. But the stock apears to be less risky and, when comparing its historical volatility, Netcapital is 1.27 times less risky than Scully Royalty. The stock trades about -0.07 of its potential returns per unit of risk. The Scully Royalty is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  670.00  in Scully Royalty on December 30, 2024 and sell it today you would earn a total of  131.00  from holding Scully Royalty or generate 19.55% return on investment over 90 days.

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

Netcapital  vs.  Scully Royalty

Netcapital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Netcapital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Scully Royalty

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Scully Royalty are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, Scully Royalty disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Netcapital and Scully Royalty

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

The idea behind Netcapital and Scully Royalty 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.