Correlation Between SIR Royalty and Chemtrade Logistics

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

By analyzing existing cross correlation between SIR Royalty Income and Chemtrade Logistics Income, you can compare the effects of market volatilities on SIR Royalty and Chemtrade Logistics 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 SIR Royalty with a short position of Chemtrade Logistics. Check out your portfolio center. Please also check ongoing floating volatility patterns of SIR Royalty and Chemtrade Logistics.

Diversification Opportunities for SIR Royalty and Chemtrade Logistics

0.57

Correlation Coefficient

SIR Royalty  Chemtrade Logistics

Very weak diversification

The 3 months correlation between SIR and Chemtrade is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding SIR Royalty Income and Chemtrade Logistics Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chemtrade Logistics and SIR Royalty 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 SIR Royalty Income are associated (or correlated) with Chemtrade Logistics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chemtrade Logistics has no effect on the direction of SIR Royalty i.e., SIR Royalty and Chemtrade Logistics go up and down completely randomly.

Pair Corralation between SIR Royalty and Chemtrade Logistics

Assuming the 90 days trading horizon SIR Royalty is expected to generate 1.55 times less return on investment than Chemtrade Logistics. In addition to that, SIR Royalty is 1.24 times more volatile than Chemtrade Logistics Income. It trades about 0.07 of its total potential returns per unit of risk. Chemtrade Logistics Income is currently generating about 0.14 per unit of volatility. If you would invest  1,022  in Chemtrade Logistics Income on September 13, 2024 and sell it today you would earn a total of  115.00  from holding Chemtrade Logistics Income or generate 11.25% return on investment over 90 days.

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

SIR Royalty Income  vs.  Chemtrade Logistics Income

SIR Royalty Income

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SIR Royalty Income are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SIR Royalty may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Chemtrade Logistics

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chemtrade Logistics Income are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating technical and fundamental indicators, Chemtrade Logistics may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SIR Royalty and Chemtrade Logistics

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

The idea behind SIR Royalty Income and Chemtrade Logistics Income 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.