Correlation Between Royalty Management and ODDITY Tech

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

Diversification Opportunities for Royalty Management and ODDITY Tech

0.15

Correlation Coefficient

Royalty Management  ODDITY Tech

Average diversification

The 3 months correlation between Royalty and ODDITY is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Royalty Management Holding and ODDITY Tech Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ODDITY Tech 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 ODDITY Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ODDITY Tech has no effect on the direction of Royalty Management i.e., Royalty Management and ODDITY Tech go up and down completely randomly.

Pair Corralation between Royalty Management and ODDITY Tech

Given the investment horizon of 90 days Royalty Management Holding is expected to generate 1.17 times more return on investment than ODDITY Tech. However, Royalty Management is 1.17 times more volatile than ODDITY Tech Ltd. It trades about 0.11 of its potential returns per unit of risk. ODDITY Tech Ltd is currently generating about 0.01 per unit of risk. If you would invest  94.00  in Royalty Management Holding on December 27, 2024 and sell it today you would earn a total of  18.00  from holding Royalty Management Holding or generate 19.15% return on investment over 90 days.

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

Royalty Management Holding  vs.  ODDITY Tech Ltd

Royalty Management

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Royalty Management Holding are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Royalty Management displayed solid returns over the last few months and may actually be approaching a breakup point.

ODDITY Tech

Risk-Adjusted Performance

Very Weak

Over the last 90 days ODDITY Tech Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, ODDITY Tech is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Royalty Management and ODDITY Tech

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

The idea behind Royalty Management Holding and ODDITY Tech Ltd 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.