Correlation Between Royal Road and RTG Mining

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

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

Diversification Opportunities for Royal Road and RTG Mining

0.04

Correlation Coefficient

Royal Road  RTG Mining

Significant diversification

The 3 months correlation between Royal and RTG is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Royal Road Minerals and RTG Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RTG Mining and Royal Road 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 Road Minerals are associated (or correlated) with RTG Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RTG Mining has no effect on the direction of Royal Road i.e., Royal Road and RTG Mining go up and down completely randomly.

Pair Corralation between Royal Road and RTG Mining

Assuming the 90 days horizon Royal Road is expected to generate 16.64 times less return on investment than RTG Mining. But when comparing it to its historical volatility, Royal Road Minerals is 4.47 times less risky than RTG Mining. It trades about 0.03 of its potential returns per unit of risk. RTG Mining is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  3.00  in RTG Mining on December 28, 2024 and sell it today you would earn a total of  0.00  from holding RTG Mining or generate 0.0% return on investment over 90 days.

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

Royal Road Minerals  vs.  RTG Mining

Royal Road Minerals

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Royal Road Minerals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Royal Road may actually be approaching a critical reversion point that can send shares even higher in April 2025.

RTG Mining

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in RTG Mining are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal technical and fundamental indicators, RTG Mining displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Royal Road and RTG Mining

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

The idea behind Royal Road Minerals and RTG 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.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.