Correlation Between Royal Gold and Grupo Simec

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

By analyzing existing cross correlation between Royal Gold and Grupo Simec SAB, you can compare the effects of market volatilities on Royal Gold and Grupo Simec 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 Royal Gold with a short position of Grupo Simec. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Gold and Grupo Simec.

Diversification Opportunities for Royal Gold and Grupo Simec

-0.13

Correlation Coefficient

Royal Gold  Grupo Simec

Good diversification

The 3 months correlation between Royal and Grupo is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Royal Gold and Grupo Simec SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Simec SAB and Royal Gold 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 Royal Gold are associated (or correlated) with Grupo Simec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Simec SAB has no effect on the direction of Royal Gold i.e., Royal Gold and Grupo Simec go up and down completely randomly.

Pair Corralation between Royal Gold and Grupo Simec

Given the investment horizon of 90 days Royal Gold is expected to under-perform the Grupo Simec. But the stock apears to be less risky and, when comparing its historical volatility, Royal Gold is 1.66 times less risky than Grupo Simec. The stock trades about -0.05 of its potential returns per unit of risk. The Grupo Simec SAB is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  2,855  in Grupo Simec SAB on September 23, 2024 and sell it today you would lose (203.00) from holding Grupo Simec SAB or give up 7.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	89.23%
Values	Daily Returns

Royal Gold  vs.  Grupo Simec SAB

Royal Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Royal Gold has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Royal Gold is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Grupo Simec SAB

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Royal Gold and Grupo Simec

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

The idea behind Royal Gold and Grupo Simec SAB 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.