Correlation Between Royce Micro and Sachem Capital

Can any of the company-specific risk be diversified away by investing in both Royce Micro and Sachem Capital 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 Royce Micro and Sachem Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Royce Micro Cap and Sachem Capital Corp, you can compare the effects of market volatilities on Royce Micro and Sachem Capital 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 Royce Micro with a short position of Sachem Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royce Micro and Sachem Capital.

Diversification Opportunities for Royce Micro and Sachem Capital

0.45

Correlation Coefficient

Royce Micro  Sachem Capital

Very weak diversification

The 3 months correlation between Royce and Sachem is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Royce Micro Cap and Sachem Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sachem Capital Corp and Royce Micro 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 Royce Micro Cap are associated (or correlated) with Sachem Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sachem Capital Corp has no effect on the direction of Royce Micro i.e., Royce Micro and Sachem Capital go up and down completely randomly.

Pair Corralation between Royce Micro and Sachem Capital

Considering the 90-day investment horizon Royce Micro Cap is expected to under-perform the Sachem Capital. In addition to that, Royce Micro is 5.72 times more volatile than Sachem Capital Corp. It trades about -0.07 of its total potential returns per unit of risk. Sachem Capital Corp is currently generating about 0.18 per unit of volatility. If you would invest  2,464  in Sachem Capital Corp on September 22, 2024 and sell it today you would earn a total of  18.00  from holding Sachem Capital Corp or generate 0.73% return on investment over 90 days.

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

Royce Micro Cap  vs.  Sachem Capital Corp

Royce Micro Cap

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Royce Micro Cap are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable primary indicators, Royce Micro is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Sachem Capital Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sachem Capital Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Sachem Capital is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Royce Micro and Sachem Capital

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

The idea behind Royce Micro Cap and Sachem Capital Corp 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.