Correlation Between Royalty Management and Logan Ridge

Can any of the company-specific risk be diversified away by investing in both Royalty Management and Logan Ridge 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 Logan Ridge 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 Logan Ridge Finance, you can compare the effects of market volatilities on Royalty Management and Logan Ridge 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 Logan Ridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royalty Management and Logan Ridge.

Diversification Opportunities for Royalty Management and Logan Ridge

0.55

Correlation Coefficient

Royalty Management  Logan Ridge

Very weak diversification

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

Pair Corralation between Royalty Management and Logan Ridge

Given the investment horizon of 90 days Royalty Management Holding is expected to under-perform the Logan Ridge. In addition to that, Royalty Management is 4.95 times more volatile than Logan Ridge Finance. It trades about -0.04 of its total potential returns per unit of risk. Logan Ridge Finance is currently generating about -0.19 per unit of volatility. If you would invest  2,598  in Logan Ridge Finance on September 28, 2024 and sell it today you would lose (121.00) from holding Logan Ridge Finance or give up 4.66% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Royalty Management Holding  vs.  Logan Ridge Finance

Royalty Management

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Royalty Management Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Royalty Management is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Logan Ridge Finance

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Logan Ridge Finance are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Logan Ridge is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Royalty Management and Logan Ridge

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

The idea behind Royalty Management Holding and Logan Ridge Finance 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.