Correlation Between Royce Value and Central Securities

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

By analyzing existing cross correlation between Royce Value Closed and Central Securities, you can compare the effects of market volatilities on Royce Value and Central Securities 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 Royce Value with a short position of Central Securities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royce Value and Central Securities.

Diversification Opportunities for Royce Value and Central Securities

0.9

Correlation Coefficient

Royce Value  Central Securities

Almost no diversification

The 3 months correlation between Royce and Central is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Royce Value Closed and Central Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Securities and Royce Value 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 Royce Value Closed are associated (or correlated) with Central Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Securities has no effect on the direction of Royce Value i.e., Royce Value and Central Securities go up and down completely randomly.

Pair Corralation between Royce Value and Central Securities

Considering the 90-day investment horizon Royce Value Closed is expected to generate 1.79 times more return on investment than Central Securities. However, Royce Value is 1.79 times more volatile than Central Securities. It trades about 0.16 of its potential returns per unit of risk. Central Securities is currently generating about 0.22 per unit of risk. If you would invest  1,478  in Royce Value Closed on September 3, 2024 and sell it today you would earn a total of  187.00  from holding Royce Value Closed or generate 12.65% return on investment over 90 days.

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

Royce Value Closed  vs.  Central Securities

Royce Value Closed

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Royce Value Closed are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Royce Value may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Central Securities

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Central Securities are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Central Securities may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Royce Value and Central Securities

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

The idea behind Royce Value Closed and Central Securities 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.