Correlation Between SIR Royalty and MTY Food

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

Diversification Opportunities for SIR Royalty and MTY Food

0.63

Correlation Coefficient

SIR Royalty  MTY Food

Poor diversification

The 3 months correlation between SIR and MTY is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding SIR Royalty Income and MTY Food Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MTY Food Group 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 MTY Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MTY Food Group has no effect on the direction of SIR Royalty i.e., SIR Royalty and MTY Food go up and down completely randomly.

Pair Corralation between SIR Royalty and MTY Food

Assuming the 90 days trading horizon SIR Royalty is expected to generate 13.67 times less return on investment than MTY Food. In addition to that, SIR Royalty is 1.0 times more volatile than MTY Food Group. It trades about 0.01 of its total potential returns per unit of risk. MTY Food Group is currently generating about 0.15 per unit of volatility. If you would invest  4,188  in MTY Food Group on September 3, 2024 and sell it today you would earn a total of  587.00  from holding MTY Food Group or generate 14.02% return on investment over 90 days.

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

SIR Royalty Income  vs.  MTY Food Group

SIR Royalty Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SIR Royalty Income has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

MTY Food Group

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MTY Food Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, MTY Food displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SIR Royalty and MTY Food

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

The idea behind SIR Royalty Income and MTY Food Group 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.