Correlation Between Royal Helium and Spectral Med

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

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

Diversification Opportunities for Royal Helium and Spectral Med

0.64

Correlation Coefficient

Royal Helium  Spectral Med

Poor diversification

The 3 months correlation between Royal and Spectral is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Royal Helium and Spectral Med in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spectral Med and Royal Helium 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 Helium are associated (or correlated) with Spectral Med. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spectral Med has no effect on the direction of Royal Helium i.e., Royal Helium and Spectral Med go up and down completely randomly.

Pair Corralation between Royal Helium and Spectral Med

Assuming the 90 days horizon Royal Helium is expected to generate 67.97 times more return on investment than Spectral Med. However, Royal Helium is 67.97 times more volatile than Spectral Med. It trades about 0.27 of its potential returns per unit of risk. Spectral Med is currently generating about 0.17 per unit of risk. If you would invest  3.00  in Royal Helium on December 22, 2024 and sell it today you would earn a total of  3,432  from holding Royal Helium or generate 114400.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Royal Helium  vs.  Spectral Med

Royal Helium

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Royal Helium are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Royal Helium showed solid returns over the last few months and may actually be approaching a breakup point.

Spectral Med

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Spectral Med are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Spectral Med displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Royal Helium and Spectral Med

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

The idea behind Royal Helium and Spectral Med 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.

Check out your portfolio center.

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 Bonds Directory module to find actively traded corporate debentures issued by US companies.