Correlation Between Molson Coors and Royalty Management

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

By analyzing existing cross correlation between Molson Coors Brewing and Royalty Management Holding, you can compare the effects of market volatilities on Molson Coors and Royalty Management 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 Molson Coors with a short position of Royalty Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of Molson Coors and Royalty Management.

Diversification Opportunities for Molson Coors and Royalty Management

0.37

Correlation Coefficient

Molson Coors  Royalty Management

Weak diversification

The 3 months correlation between Molson and Royalty is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Molson Coors Brewing and Royalty Management Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royalty Management and Molson Coors 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 Molson Coors Brewing are associated (or correlated) with Royalty Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royalty Management has no effect on the direction of Molson Coors i.e., Molson Coors and Royalty Management go up and down completely randomly.

Pair Corralation between Molson Coors and Royalty Management

Considering the 90-day investment horizon Molson Coors Brewing is expected to generate 0.15 times more return on investment than Royalty Management. However, Molson Coors Brewing is 6.61 times less risky than Royalty Management. It trades about -0.25 of its potential returns per unit of risk. Royalty Management Holding is currently generating about -0.04 per unit of risk. If you would invest  6,081  in Molson Coors Brewing on September 28, 2024 and sell it today you would lose (280.00) from holding Molson Coors Brewing or give up 4.6% of portfolio value over 90 days.

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

Molson Coors Brewing  vs.  Royalty Management Holding

Molson Coors Brewing

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Molson Coors Brewing are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Molson Coors is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Royalty Management

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Royalty Management Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Royalty Management is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Molson Coors and Royalty Management

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

The idea behind Molson Coors Brewing and Royalty Management Holding 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.