Correlation Between Investment Trust and Royal Orchid

Can any of the company-specific risk be diversified away by investing in both Investment Trust and Royal Orchid 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 Investment Trust and Royal Orchid into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between The Investment Trust and Royal Orchid Hotels, you can compare the effects of market volatilities on Investment Trust and Royal Orchid 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 Investment Trust with a short position of Royal Orchid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Investment Trust and Royal Orchid.

Diversification Opportunities for Investment Trust and Royal Orchid

0.55

Correlation Coefficient

Investment Trust  Royal Orchid

Very weak diversification

The 3 months correlation between Investment and Royal is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding The Investment Trust and Royal Orchid Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royal Orchid Hotels and Investment Trust 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 The Investment Trust are associated (or correlated) with Royal Orchid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royal Orchid Hotels has no effect on the direction of Investment Trust i.e., Investment Trust and Royal Orchid go up and down completely randomly.

Pair Corralation between Investment Trust and Royal Orchid

Assuming the 90 days trading horizon The Investment Trust is expected to generate 1.29 times more return on investment than Royal Orchid. However, Investment Trust is 1.29 times more volatile than Royal Orchid Hotels. It trades about 0.14 of its potential returns per unit of risk. Royal Orchid Hotels is currently generating about 0.11 per unit of risk. If you would invest  13,995  in The Investment Trust on April 25, 2025 and sell it today you would earn a total of  3,081  from holding The Investment Trust or generate 22.02% return on investment over 90 days.

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

The Investment Trust  vs.  Royal Orchid Hotels

Investment Trust

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Investment Trust are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Investment Trust exhibited solid returns over the last few months and may actually be approaching a breakup point.

Royal Orchid Hotels

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Royal Orchid Hotels are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady essential indicators, Royal Orchid sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Investment Trust and Royal Orchid

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

The idea behind The Investment Trust and Royal Orchid Hotels 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.