Correlation Between Royce Special and Saat Moderate

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

By analyzing existing cross correlation between Royce Special Equity and Saat Moderate Strategy, you can compare the effects of market volatilities on Royce Special and Saat Moderate 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 Special with a short position of Saat Moderate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royce Special and Saat Moderate.

Diversification Opportunities for Royce Special and Saat Moderate

0.01

Correlation Coefficient

Royce Special  Saat Moderate

Significant diversification

The 3 months correlation between Royce and Saat is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Royce Special Equity and Saat Moderate Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Saat Moderate Strategy and Royce Special 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 Special Equity are associated (or correlated) with Saat Moderate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Saat Moderate Strategy has no effect on the direction of Royce Special i.e., Royce Special and Saat Moderate go up and down completely randomly.

Pair Corralation between Royce Special and Saat Moderate

Assuming the 90 days horizon Royce Special Equity is expected to under-perform the Saat Moderate. In addition to that, Royce Special is 5.42 times more volatile than Saat Moderate Strategy. It trades about -0.07 of its total potential returns per unit of risk. Saat Moderate Strategy is currently generating about 0.08 per unit of volatility. If you would invest  1,145  in Saat Moderate Strategy on December 5, 2024 and sell it today you would earn a total of  32.00  from holding Saat Moderate Strategy or generate 2.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.19%
Values	Daily Returns

Royce Special Equity  vs.  Saat Moderate Strategy

Royce Special Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Royce Special Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's fundamental indicators remain fairly 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 fund investors.

Saat Moderate Strategy

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Saat Moderate Strategy are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Saat Moderate 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 Special and Saat Moderate

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

The idea behind Royce Special Equity and Saat Moderate Strategy 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.