Correlation Between Oakley Capital and Royal Bank

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

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

Diversification Opportunities for Oakley Capital and Royal Bank

0.55

Correlation Coefficient

Oakley Capital  Royal Bank

Very weak diversification

The 3 months correlation between Oakley and Royal is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Oakley Capital Investments and Royal Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royal Bank and Oakley Capital 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 Oakley Capital Investments are associated (or correlated) with Royal Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royal Bank has no effect on the direction of Oakley Capital i.e., Oakley Capital and Royal Bank go up and down completely randomly.

Pair Corralation between Oakley Capital and Royal Bank

Assuming the 90 days trading horizon Oakley Capital Investments is expected to under-perform the Royal Bank. But the stock apears to be less risky and, when comparing its historical volatility, Oakley Capital Investments is 1.91 times less risky than Royal Bank. The stock trades about -0.13 of its potential returns per unit of risk. The Royal Bank of is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  11,971  in Royal Bank of on December 30, 2024 and sell it today you would lose (595.00) from holding Royal Bank of or give up 4.97% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.92%
Values	Daily Returns

Oakley Capital Investments  vs.  Royal Bank of

Oakley Capital Inves

Risk-Adjusted Performance

Very Weak

Over the last 90 days Oakley Capital Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Oakley Capital is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Royal Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Royal Bank of has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Royal Bank 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 Oakley Capital and Royal Bank

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

The idea behind Oakley Capital Investments and Royal Bank of 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.