Correlation Between Supremex and SIR Royalty

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

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

Diversification Opportunities for Supremex and SIR Royalty

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Correlation Coefficient

Supremex  SIR Royalty

Pay attention - limited upside

The 3 months correlation between Supremex and SIR is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Supremex and SIR Royalty Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIR Royalty Income 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 SIR Royalty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIR Royalty Income has no effect on the direction of Supremex i.e., Supremex and SIR Royalty go up and down completely randomly.

Pair Corralation between Supremex and SIR Royalty

Assuming the 90 days trading horizon Supremex is expected to generate 1.73 times more return on investment than SIR Royalty. However, Supremex is 1.73 times more volatile than SIR Royalty Income. It trades about 0.08 of its potential returns per unit of risk. SIR Royalty Income is currently generating about 0.02 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	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Supremex  vs.  SIR Royalty Income

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.

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.

Pair Trading with Supremex and SIR Royalty

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

The idea behind Supremex and SIR Royalty Income 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.