Correlation Between Adriatic Metals and Regal Funds

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

By analyzing existing cross correlation between Adriatic Metals Plc and Regal Funds Management, you can compare the effects of market volatilities on Adriatic Metals and Regal Funds 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 Adriatic Metals with a short position of Regal Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adriatic Metals and Regal Funds.

Diversification Opportunities for Adriatic Metals and Regal Funds

0.83

Correlation Coefficient

Adriatic Metals  Regal Funds

Very poor diversification

The 3 months correlation between Adriatic and Regal is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Adriatic Metals Plc and Regal Funds Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regal Funds Management and Adriatic Metals 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 Adriatic Metals Plc are associated (or correlated) with Regal Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regal Funds Management has no effect on the direction of Adriatic Metals i.e., Adriatic Metals and Regal Funds go up and down completely randomly.

Pair Corralation between Adriatic Metals and Regal Funds

Assuming the 90 days trading horizon Adriatic Metals Plc is expected to generate 1.52 times more return on investment than Regal Funds. However, Adriatic Metals is 1.52 times more volatile than Regal Funds Management. It trades about 0.22 of its potential returns per unit of risk. Regal Funds Management is currently generating about 0.17 per unit of risk. If you would invest  270.00  in Adriatic Metals Plc on September 5, 2024 and sell it today you would earn a total of  138.00  from holding Adriatic Metals Plc or generate 51.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.46%
Values	Daily Returns

Adriatic Metals Plc  vs.  Regal Funds Management

Adriatic Metals Plc

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Adriatic Metals Plc are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Adriatic Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Regal Funds Management

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Regal Funds Management are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak essential indicators, Regal Funds unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Adriatic Metals and Regal Funds

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

The idea behind Adriatic Metals Plc and Regal Funds Management 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.