Correlation Between Royal Gold and Grupo Simec

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

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

Diversification Opportunities for Royal Gold and Grupo Simec

-0.32

Correlation Coefficient

Royal Gold  Grupo Simec

Very good diversification

The 3 months correlation between Royal and Grupo is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Royal Gold and Grupo Simec SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Simec SAB and Royal Gold 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 Royal Gold are associated (or correlated) with Grupo Simec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Simec SAB has no effect on the direction of Royal Gold i.e., Royal Gold and Grupo Simec go up and down completely randomly.

Pair Corralation between Royal Gold and Grupo Simec

Given the investment horizon of 90 days Royal Gold is expected to generate 0.38 times more return on investment than Grupo Simec. However, Royal Gold is 2.65 times less risky than Grupo Simec. It trades about 0.19 of its potential returns per unit of risk. Grupo Simec SAB is currently generating about 0.03 per unit of risk. If you would invest  13,287  in Royal Gold on December 24, 2024 and sell it today you would earn a total of  2,414  from holding Royal Gold or generate 18.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.08%
Values	Daily Returns

Royal Gold  vs.  Grupo Simec SAB

Royal Gold

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Royal Gold are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating essential indicators, Royal Gold exhibited solid returns over the last few months and may actually be approaching a breakup point.

Grupo Simec SAB

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Simec SAB are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain forward indicators, Grupo Simec may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Royal Gold and Grupo Simec

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

The idea behind Royal Gold and Grupo Simec SAB 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.