Correlation Between SIR Royalty and Pizza Pizza

Can any of the company-specific risk be diversified away by investing in both SIR Royalty and Pizza Pizza 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 Pizza Pizza 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 Pizza Pizza Royalty, you can compare the effects of market volatilities on SIR Royalty and Pizza Pizza 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 Pizza Pizza. Check out your portfolio center. Please also check ongoing floating volatility patterns of SIR Royalty and Pizza Pizza.

Diversification Opportunities for SIR Royalty and Pizza Pizza

0.69

Correlation Coefficient

SIR Royalty  Pizza Pizza

Poor diversification

The 3 months correlation between SIR and Pizza is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding SIR Royalty Income and Pizza Pizza Royalty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pizza Pizza Royalty 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 Pizza Pizza. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pizza Pizza Royalty has no effect on the direction of SIR Royalty i.e., SIR Royalty and Pizza Pizza go up and down completely randomly.

Pair Corralation between SIR Royalty and Pizza Pizza

Assuming the 90 days trading horizon SIR Royalty Income is expected to under-perform the Pizza Pizza. In addition to that, SIR Royalty is 2.52 times more volatile than Pizza Pizza Royalty. It trades about -0.06 of its total potential returns per unit of risk. Pizza Pizza Royalty is currently generating about 0.11 per unit of volatility. If you would invest  1,318  in Pizza Pizza Royalty on September 5, 2024 and sell it today you would earn a total of  18.00  from holding Pizza Pizza Royalty or generate 1.37% return on investment over 90 days.

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

SIR Royalty Income  vs.  Pizza Pizza Royalty

SIR Royalty Income

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SIR Royalty Income are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, SIR Royalty is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pizza Pizza Royalty

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pizza Pizza Royalty are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Pizza Pizza may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SIR Royalty and Pizza Pizza

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

The idea behind SIR Royalty Income and Pizza Pizza Royalty 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.