Correlation Between SIR Royalty and Supremex

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

Diversification Opportunities for SIR Royalty and Supremex

-0.24

Correlation Coefficient

SIR Royalty  Supremex

Very good diversification

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

Pair Corralation between SIR Royalty and Supremex

Assuming the 90 days trading horizon SIR Royalty Income is expected to generate 0.59 times more return on investment than Supremex. However, SIR Royalty Income is 1.69 times less risky than Supremex. It trades about 0.03 of its potential returns per unit of risk. Supremex is currently generating about 0.02 per unit of risk. If you would invest  1,247  in SIR Royalty Income on December 1, 2024 and sell it today you would earn a total of  31.00  from holding SIR Royalty Income or generate 2.49% 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.  Supremex

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 2 (%) 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.

Supremex

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Supremex are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Supremex is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with SIR Royalty and Supremex

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

The idea behind SIR Royalty Income and Supremex 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.