Correlation Between Royal Orchid and BAG Films

Can any of the company-specific risk be diversified away by investing in both Royal Orchid and BAG Films 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 Royal Orchid and BAG Films into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Royal Orchid Hotels and BAG Films and, you can compare the effects of market volatilities on Royal Orchid and BAG Films 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 Royal Orchid with a short position of BAG Films. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Orchid and BAG Films.

Diversification Opportunities for Royal Orchid and BAG Films

-0.47

Correlation Coefficient

Royal Orchid  BAG Films

Very good diversification

The 3 months correlation between Royal and BAG is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Royal Orchid Hotels and BAG Films and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BAG Films and Royal Orchid 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 Royal Orchid Hotels are associated (or correlated) with BAG Films. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BAG Films has no effect on the direction of Royal Orchid i.e., Royal Orchid and BAG Films go up and down completely randomly.

Pair Corralation between Royal Orchid and BAG Films

Assuming the 90 days trading horizon Royal Orchid Hotels is expected to generate 1.09 times more return on investment than BAG Films. However, Royal Orchid is 1.09 times more volatile than BAG Films and. It trades about 0.09 of its potential returns per unit of risk. BAG Films and is currently generating about -0.28 per unit of risk. If you would invest  36,255  in Royal Orchid Hotels on December 25, 2024 and sell it today you would earn a total of  5,315  from holding Royal Orchid Hotels or generate 14.66% return on investment over 90 days.

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

Royal Orchid Hotels  vs.  BAG Films and

Royal Orchid Hotels

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Royal Orchid Hotels are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent essential indicators, Royal Orchid sustained solid returns over the last few months and may actually be approaching a breakup point.

BAG Films

Risk-Adjusted Performance

Very Weak

Over the last 90 days BAG Films and 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 essential indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Royal Orchid and BAG Films

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

The idea behind Royal Orchid Hotels and BAG Films and 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.