Correlation Between Donnelley Financial and Scully Royalty

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

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

Diversification Opportunities for Donnelley Financial and Scully Royalty

0.46

Correlation Coefficient

Donnelley Financial  Scully Royalty

Very weak diversification

The 3 months correlation between Donnelley and Scully is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Donnelley Financial Solutions and Scully Royalty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scully Royalty and Donnelley Financial 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 Donnelley Financial Solutions are associated (or correlated) with Scully Royalty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scully Royalty has no effect on the direction of Donnelley Financial i.e., Donnelley Financial and Scully Royalty go up and down completely randomly.

Pair Corralation between Donnelley Financial and Scully Royalty

Given the investment horizon of 90 days Donnelley Financial Solutions is expected to generate 0.68 times more return on investment than Scully Royalty. However, Donnelley Financial Solutions is 1.47 times less risky than Scully Royalty. It trades about 0.08 of its potential returns per unit of risk. Scully Royalty is currently generating about 0.0 per unit of risk. If you would invest  2,798  in Donnelley Financial Solutions on February 8, 2024 and sell it today you would earn a total of  3,491  from holding Donnelley Financial Solutions or generate 124.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.79%
Values	Daily Returns

Donnelley Financial Solutions  vs.  Scully Royalty

Donnelley Financial

Risk-Adjusted Performance

0 of 100

Weak

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

Scully Royalty

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Scully Royalty has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in June 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Donnelley Financial and Scully Royalty

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

The idea behind Donnelley Financial Solutions and Scully 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.