Correlation Between Royalty Management and Mativ Holdings

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

Diversification Opportunities for Royalty Management and Mativ Holdings

0.24

Correlation Coefficient

Royalty Management  Mativ Holdings

Modest diversification

The 3 months correlation between Royalty and Mativ is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Royalty Management Holding and Mativ Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mativ Holdings 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 Mativ Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mativ Holdings has no effect on the direction of Royalty Management i.e., Royalty Management and Mativ Holdings go up and down completely randomly.

Pair Corralation between Royalty Management and Mativ Holdings

Assuming the 90 days horizon Royalty Management Holding is expected to generate 9.13 times more return on investment than Mativ Holdings. However, Royalty Management is 9.13 times more volatile than Mativ Holdings. It trades about 0.12 of its potential returns per unit of risk. Mativ Holdings is currently generating about -0.02 per unit of risk. If you would invest  6.00  in Royalty Management Holding on September 30, 2024 and sell it today you would lose (4.11) from holding Royalty Management Holding or give up 68.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	32.8%
Values	Daily Returns

Royalty Management Holding  vs.  Mativ Holdings

Royalty Management

Risk-Adjusted Performance

13 of 100

Good

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

Mativ Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mativ Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Royalty Management and Mativ Holdings

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

The idea behind Royalty Management Holding and Mativ Holdings 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.