Correlation Between Palace SA and Romcab SA

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

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

Diversification Opportunities for Palace SA and Romcab SA

0.0

Correlation Coefficient

Palace SA  Romcab SA

Pay attention - limited upside

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

Pair Corralation between Palace SA and Romcab 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

Palace SA  vs.  Romcab SA

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.

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.

Pair Trading with Palace SA and Romcab SA

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

The idea behind Palace SA and Romcab 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.