Correlation Between Regal Funds and Advanced Braking

Can any of the company-specific risk be diversified away by investing in both Regal Funds and Advanced Braking 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 Regal Funds and Advanced Braking into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Regal Funds Management and Advanced Braking Technology, you can compare the effects of market volatilities on Regal Funds and Advanced Braking 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 Regal Funds with a short position of Advanced Braking. Check out your portfolio center. Please also check ongoing floating volatility patterns of Regal Funds and Advanced Braking.

Diversification Opportunities for Regal Funds and Advanced Braking

0.69

Correlation Coefficient

Regal Funds  Advanced Braking

Poor diversification

The 3 months correlation between Regal and Advanced is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Regal Funds Management and Advanced Braking Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Braking Tec and Regal Funds 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 Regal Funds Management are associated (or correlated) with Advanced Braking. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Braking Tec has no effect on the direction of Regal Funds i.e., Regal Funds and Advanced Braking go up and down completely randomly.

Pair Corralation between Regal Funds and Advanced Braking

Assuming the 90 days trading horizon Regal Funds is expected to generate 1.21 times less return on investment than Advanced Braking. But when comparing it to its historical volatility, Regal Funds Management is 1.19 times less risky than Advanced Braking. It trades about 0.12 of its potential returns per unit of risk. Advanced Braking Technology is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  7.10  in Advanced Braking Technology on September 11, 2024 and sell it today you would earn a total of  1.40  from holding Advanced Braking Technology or generate 19.72% return on investment over 90 days.

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

Regal Funds Management  vs.  Advanced Braking Technology

Regal Funds Management

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Regal Funds Management are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Regal Funds unveiled solid returns over the last few months and may actually be approaching a breakup point.

Advanced Braking Tec

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Braking Technology are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Advanced Braking unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Regal Funds and Advanced Braking

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

The idea behind Regal Funds Management and Advanced Braking Technology 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.