Correlation Between Royalty Management and Bannix Acquisition

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

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

Diversification Opportunities for Royalty Management and Bannix Acquisition

-0.39

Correlation Coefficient

Royalty Management  Bannix Acquisition

Very good diversification

The 3 months correlation between Royalty and Bannix is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Royalty Management Holding and Bannix Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bannix Acquisition Corp and Royalty Management 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 Royalty Management Holding are associated (or correlated) with Bannix Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bannix Acquisition Corp has no effect on the direction of Royalty Management i.e., Royalty Management and Bannix Acquisition go up and down completely randomly.

Pair Corralation between Royalty Management and Bannix Acquisition

Given the investment horizon of 90 days Royalty Management Holding is expected to under-perform the Bannix Acquisition. But the stock apears to be less risky and, when comparing its historical volatility, Royalty Management Holding is 6.87 times less risky than Bannix Acquisition. The stock trades about -0.01 of its potential returns per unit of risk. The Bannix Acquisition Corp is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1.87  in Bannix Acquisition Corp on September 18, 2024 and sell it today you would earn a total of  0.13  from holding Bannix Acquisition Corp or generate 6.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	35.0%
Values	Daily Returns

Royalty Management Holding  vs.  Bannix Acquisition Corp

Royalty Management

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Royalty Management Holding are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal fundamental indicators, Royalty Management displayed solid returns over the last few months and may actually be approaching a breakup point.

Bannix Acquisition Corp

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Bannix Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly abnormal basic indicators, Bannix Acquisition showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Royalty Management and Bannix Acquisition

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

The idea behind Royalty Management Holding and Bannix Acquisition Corp 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.