Correlation Between Royal Bank and Magna Mining

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

Diversification Opportunities for Royal Bank and Magna Mining

0.71

Correlation Coefficient

Royal Bank  Magna Mining

Poor diversification

The 3 months correlation between Royal and Magna is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Royal Bank of and Magna Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magna Mining 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 Magna Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magna Mining has no effect on the direction of Royal Bank i.e., Royal Bank and Magna Mining go up and down completely randomly.

Pair Corralation between Royal Bank and Magna Mining

Assuming the 90 days horizon Royal Bank of is expected to under-perform the Magna Mining. But the stock apears to be less risky and, when comparing its historical volatility, Royal Bank of is 4.37 times less risky than Magna Mining. The stock trades about -0.04 of its potential returns per unit of risk. The Magna Mining is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  143.00  in Magna Mining on September 22, 2024 and sell it today you would lose (1.00) from holding Magna Mining or give up 0.7% of portfolio value over 90 days.

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

Royal Bank of  vs.  Magna Mining

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 very healthy basic indicators, Royal Bank is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Magna Mining

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Magna Mining are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal fundamental indicators, Magna Mining showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Royal Bank and Magna Mining

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

The idea behind Royal Bank of and Magna Mining 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.