Correlation Between Royalty Management and Natural Alternatives

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

Diversification Opportunities for Royalty Management and Natural Alternatives

-0.17

Correlation Coefficient

Royalty Management  Natural Alternatives

Good diversification

The 3 months correlation between Royalty and Natural is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Royalty Management Holding and Natural Alternatives Internati in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natural Alternatives 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 Natural Alternatives. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natural Alternatives has no effect on the direction of Royalty Management i.e., Royalty Management and Natural Alternatives go up and down completely randomly.

Pair Corralation between Royalty Management and Natural Alternatives

Given the investment horizon of 90 days Royalty Management Holding is expected to generate 2.05 times more return on investment than Natural Alternatives. However, Royalty Management is 2.05 times more volatile than Natural Alternatives International. It trades about 0.01 of its potential returns per unit of risk. Natural Alternatives International is currently generating about -0.03 per unit of risk. If you would invest  151.00  in Royalty Management Holding on October 22, 2024 and sell it today you would lose (43.00) from holding Royalty Management Holding or give up 28.48% of portfolio value over 90 days.

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

Royalty Management Holding  vs.  Natural Alternatives Internati

Royalty Management

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Royalty Management Holding are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady fundamental indicators, Royalty Management displayed solid returns over the last few months and may actually be approaching a breakup point.

Natural Alternatives

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Natural Alternatives International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, Natural Alternatives is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Royalty Management and Natural Alternatives

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

The idea behind Royalty Management Holding and Natural Alternatives International 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.