Correlation Between Royce Premier and Stone Ridge

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

By analyzing existing cross correlation between Royce Premier Fund and Stone Ridge Diversified, you can compare the effects of market volatilities on Royce Premier and Stone Ridge 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 Premier with a short position of Stone Ridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royce Premier and Stone Ridge.

Diversification Opportunities for Royce Premier and Stone Ridge

-0.65

Correlation Coefficient

Royce Premier  Stone Ridge

Excellent diversification

The 3 months correlation between Royce and Stone is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Royce Premier Fund and Stone Ridge Diversified in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stone Ridge Diversified and Royce Premier 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 Premier Fund are associated (or correlated) with Stone Ridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stone Ridge Diversified has no effect on the direction of Royce Premier i.e., Royce Premier and Stone Ridge go up and down completely randomly.

Pair Corralation between Royce Premier and Stone Ridge

Assuming the 90 days horizon Royce Premier Fund is expected to generate 5.61 times more return on investment than Stone Ridge. However, Royce Premier is 5.61 times more volatile than Stone Ridge Diversified. It trades about 0.1 of its potential returns per unit of risk. Stone Ridge Diversified is currently generating about 0.13 per unit of risk. If you would invest  819.00  in Royce Premier Fund on October 23, 2024 and sell it today you would earn a total of  13.00  from holding Royce Premier Fund or generate 1.59% return on investment over 90 days.

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

Royce Premier Fund  vs.  Stone Ridge Diversified

Royce Premier

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Royce Premier Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Stone Ridge Diversified

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Stone Ridge Diversified are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Stone Ridge is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Royce Premier and Stone Ridge

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

The idea behind Royce Premier Fund and Stone Ridge Diversified 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.