Correlation Between Royal Orchid and PB Fintech

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

Diversification Opportunities for Royal Orchid and PB Fintech

-0.25

Correlation Coefficient

Royal Orchid  PB Fintech

Very good diversification

The 3 months correlation between Royal and POLICYBZR is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Royal Orchid Hotels and PB Fintech Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PB Fintech Limited 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 PB Fintech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PB Fintech Limited has no effect on the direction of Royal Orchid i.e., Royal Orchid and PB Fintech go up and down completely randomly.

Pair Corralation between Royal Orchid and PB Fintech

Assuming the 90 days trading horizon Royal Orchid Hotels is expected to generate 0.85 times more return on investment than PB Fintech. However, Royal Orchid Hotels is 1.18 times less risky than PB Fintech. It trades about 0.06 of its potential returns per unit of risk. PB Fintech Limited is currently generating about -0.09 per unit of risk. If you would invest  35,415  in Royal Orchid Hotels on December 28, 2024 and sell it today you would earn a total of  3,015  from holding Royal Orchid Hotels or generate 8.51% return on investment over 90 days.

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

Royal Orchid Hotels  vs.  PB Fintech Limited

Royal Orchid Hotels

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Royal Orchid Hotels are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain essential indicators, Royal Orchid may actually be approaching a critical reversion point that can send shares even higher in April 2025.

PB Fintech Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days PB Fintech Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Royal Orchid and PB Fintech

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

The idea behind Royal Orchid Hotels and PB Fintech Limited 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .