Correlation Between Standard Life and Royce Value

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

By analyzing existing cross correlation between Standard Life Aberdeen and Royce Value Closed, you can compare the effects of market volatilities on Standard Life and Royce Value 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 Standard Life with a short position of Royce Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Standard Life and Royce Value.

Diversification Opportunities for Standard Life and Royce Value

-0.74

Correlation Coefficient

Standard Life  Royce Value

Pay attention - limited upside

The 3 months correlation between Standard and Royce is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Standard Life Aberdeen and Royce Value Closed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royce Value Closed and Standard Life 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 Standard Life Aberdeen are associated (or correlated) with Royce Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royce Value Closed has no effect on the direction of Standard Life i.e., Standard Life and Royce Value go up and down completely randomly.

Pair Corralation between Standard Life and Royce Value

Assuming the 90 days horizon Standard Life Aberdeen is expected to generate 2.9 times more return on investment than Royce Value. However, Standard Life is 2.9 times more volatile than Royce Value Closed. It trades about 0.16 of its potential returns per unit of risk. Royce Value Closed is currently generating about -0.09 per unit of risk. If you would invest  706.00  in Standard Life Aberdeen on December 20, 2024 and sell it today you would earn a total of  199.00  from holding Standard Life Aberdeen or generate 28.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Standard Life Aberdeen  vs.  Royce Value Closed

Standard Life Aberdeen

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Standard Life Aberdeen are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Standard Life showed solid returns over the last few months and may actually be approaching a breakup point.

Royce Value Closed

Risk-Adjusted Performance

Very Weak

Over the last 90 days Royce Value Closed has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Royce Value is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Standard Life and Royce Value

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

The idea behind Standard Life Aberdeen and Royce Value Closed 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 Global Correlations module to find global opportunities by holding instruments from different markets.