Correlation Between Supremex and Keg Royalties

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

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

Diversification Opportunities for Supremex and Keg Royalties

-0.35

Correlation Coefficient

Supremex  Keg Royalties

Very good diversification

The 3 months correlation between Supremex and Keg is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Supremex and The Keg Royalties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keg Royalties and Supremex 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 Supremex are associated (or correlated) with Keg Royalties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keg Royalties has no effect on the direction of Supremex i.e., Supremex and Keg Royalties go up and down completely randomly.

Pair Corralation between Supremex and Keg Royalties

Assuming the 90 days trading horizon Supremex is expected to generate 2.28 times more return on investment than Keg Royalties. However, Supremex is 2.28 times more volatile than The Keg Royalties. It trades about 0.08 of its potential returns per unit of risk. The Keg Royalties is currently generating about -0.1 per unit of risk. If you would invest  366.00  in Supremex on December 30, 2024 and sell it today you would earn a total of  42.00  from holding Supremex or generate 11.48% return on investment over 90 days.

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

Supremex  vs.  The Keg Royalties

Supremex

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Supremex are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Supremex displayed solid returns over the last few months and may actually be approaching a breakup point.

Keg Royalties

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Keg Royalties has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Supremex and Keg Royalties

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

The idea behind Supremex and The Keg 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.