Correlation Between Royal Bank and Kestrel Gold

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

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

Diversification Opportunities for Royal Bank and Kestrel Gold

0.01

Correlation Coefficient

Royal Bank  Kestrel Gold

Significant diversification

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

Pair Corralation between Royal Bank and Kestrel Gold

Assuming the 90 days trading horizon Royal Bank of is expected to generate 0.03 times more return on investment than Kestrel Gold. However, Royal Bank of is 29.51 times less risky than Kestrel Gold. It trades about -0.06 of its potential returns per unit of risk. Kestrel Gold is currently generating about -0.09 per unit of risk. If you would invest  2,573  in Royal Bank of on October 8, 2024 and sell it today you would lose (11.00) from holding Royal Bank of or give up 0.43% of portfolio value over 90 days.

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

Royal Bank of  vs.  Kestrel Gold

Royal Bank

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Royal Bank of are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Royal Bank is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Kestrel Gold

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kestrel Gold are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Kestrel Gold may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Royal Bank and Kestrel Gold

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

The idea behind Royal Bank of and Kestrel Gold 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.