Correlation Between Royalty Management and Visa

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

Diversification Opportunities for Royalty Management and Visa

-0.41

Correlation Coefficient

Royalty Management  Visa

Very good diversification

The 3 months correlation between Royalty and Visa is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Royalty Management Holding and Visa Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visa Class A 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 Visa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Visa Class A has no effect on the direction of Royalty Management i.e., Royalty Management and Visa go up and down completely randomly.

Pair Corralation between Royalty Management and Visa

Assuming the 90 days horizon Royalty Management Holding is expected to generate 23.32 times more return on investment than Visa. However, Royalty Management is 23.32 times more volatile than Visa Class A. It trades about 0.15 of its potential returns per unit of risk. Visa Class A is currently generating about 0.15 per unit of risk. If you would invest  1.50  in Royalty Management Holding on September 19, 2024 and sell it today you would earn a total of  0.50  from holding Royalty Management Holding or generate 33.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	55.56%
Values	Daily Returns

Royalty Management Holding  vs.  Visa Class A

Royalty Management

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Royalty Management Holding are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Royalty Management showed solid returns over the last few months and may actually be approaching a breakup point.

Visa Class A

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Royalty Management and Visa

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

The idea behind Royalty Management Holding and Visa Class A 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.