Correlation Between SIR Royalty and Boston Pizza

Can any of the company-specific risk be diversified away by investing in both SIR Royalty and Boston Pizza 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 SIR Royalty and Boston Pizza into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SIR Royalty Income and Boston Pizza Royalties, you can compare the effects of market volatilities on SIR Royalty and Boston Pizza 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 SIR Royalty with a short position of Boston Pizza. Check out your portfolio center. Please also check ongoing floating volatility patterns of SIR Royalty and Boston Pizza.

Diversification Opportunities for SIR Royalty and Boston Pizza

-0.24

Correlation Coefficient

SIR Royalty  Boston Pizza

Very good diversification

The 3 months correlation between SIR and Boston is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding SIR Royalty Income and Boston Pizza Royalties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Pizza Royalties and SIR Royalty 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 SIR Royalty Income are associated (or correlated) with Boston Pizza. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Pizza Royalties has no effect on the direction of SIR Royalty i.e., SIR Royalty and Boston Pizza go up and down completely randomly.

Pair Corralation between SIR Royalty and Boston Pizza

Assuming the 90 days trading horizon SIR Royalty Income is expected to generate 1.65 times more return on investment than Boston Pizza. However, SIR Royalty is 1.65 times more volatile than Boston Pizza Royalties. It trades about 0.02 of its potential returns per unit of risk. Boston Pizza Royalties is currently generating about -0.04 per unit of risk. If you would invest  1,240  in SIR Royalty Income on December 30, 2024 and sell it today you would earn a total of  15.00  from holding SIR Royalty Income or generate 1.21% return on investment over 90 days.

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

SIR Royalty Income  vs.  Boston Pizza Royalties

SIR Royalty Income

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SIR Royalty Income are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, SIR Royalty is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Boston Pizza Royalties

Risk-Adjusted Performance

Very Weak

Over the last 90 days Boston Pizza Royalties has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Boston Pizza is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SIR Royalty and Boston Pizza

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

The idea behind SIR Royalty Income and Boston Pizza Royalties 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.