Correlation Between Pizza Pizza and SIR Royalty

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

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

Diversification Opportunities for Pizza Pizza and SIR Royalty

0.91

Correlation Coefficient

Pizza Pizza  SIR Royalty

Almost no diversification

The 3 months correlation between Pizza and SIR is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Pizza Pizza Royalty and SIR Royalty Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIR Royalty Income and Pizza Pizza 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 Pizza Pizza Royalty are associated (or correlated) with SIR Royalty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIR Royalty Income has no effect on the direction of Pizza Pizza i.e., Pizza Pizza and SIR Royalty go up and down completely randomly.

Pair Corralation between Pizza Pizza and SIR Royalty

Assuming the 90 days trading horizon Pizza Pizza is expected to generate 1.26 times less return on investment than SIR Royalty. But when comparing it to its historical volatility, Pizza Pizza Royalty is 1.44 times less risky than SIR Royalty. It trades about 0.2 of its potential returns per unit of risk. SIR Royalty Income is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,262  in SIR Royalty Income on May 6, 2025 and sell it today you would earn a total of  168.00  from holding SIR Royalty Income or generate 13.31% return on investment over 90 days.

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

Pizza Pizza Royalty  vs.  SIR Royalty Income

Pizza Pizza Royalty

Risk-Adjusted Performance

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 September 2025.

SIR Royalty Income

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SIR Royalty Income are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SIR Royalty sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pizza Pizza and SIR Royalty

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

The idea behind Pizza Pizza Royalty and SIR Royalty 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.

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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.