Correlation Between Royce Opportunity and Aquila Three

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

By analyzing existing cross correlation between Royce Opportunity Fund and Aquila Three Peaks, you can compare the effects of market volatilities on Royce Opportunity and Aquila Three 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 Opportunity with a short position of Aquila Three. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royce Opportunity and Aquila Three.

Diversification Opportunities for Royce Opportunity and Aquila Three

0.24

Correlation Coefficient

Royce Opportunity  Aquila Three

Modest diversification

The 3 months correlation between Royce and Aquila is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Royce Opportunity Fund and Aquila Three Peaks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aquila Three Peaks and Royce Opportunity 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 Opportunity Fund are associated (or correlated) with Aquila Three. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aquila Three Peaks has no effect on the direction of Royce Opportunity i.e., Royce Opportunity and Aquila Three go up and down completely randomly.

Pair Corralation between Royce Opportunity and Aquila Three

Assuming the 90 days horizon Royce Opportunity Fund is expected to generate 8.59 times more return on investment than Aquila Three. However, Royce Opportunity is 8.59 times more volatile than Aquila Three Peaks. It trades about 0.09 of its potential returns per unit of risk. Aquila Three Peaks is currently generating about 0.05 per unit of risk. If you would invest  1,723  in Royce Opportunity Fund on September 12, 2024 and sell it today you would earn a total of  32.00  from holding Royce Opportunity Fund or generate 1.86% return on investment over 90 days.

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

Royce Opportunity Fund  vs.  Aquila Three Peaks

Royce Opportunity

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Royce Opportunity Fund are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Royce Opportunity showed solid returns over the last few months and may actually be approaching a breakup point.

Aquila Three Peaks

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aquila Three Peaks are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Aquila Three is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Royce Opportunity and Aquila Three

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

The idea behind Royce Opportunity Fund and Aquila Three Peaks 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.