Correlation Between RBC Portefeuille and PHN Canadian

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

By analyzing existing cross correlation between RBC Portefeuille de and PHN Canadian Equity, you can compare the effects of market volatilities on RBC Portefeuille and PHN Canadian 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 RBC Portefeuille with a short position of PHN Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of RBC Portefeuille and PHN Canadian.

Diversification Opportunities for RBC Portefeuille and PHN Canadian

0.8

Correlation Coefficient

RBC Portefeuille  PHN Canadian

Very poor diversification

The 3 months correlation between RBC and PHN is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding RBC Portefeuille de and PHN Canadian Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PHN Canadian Equity and RBC Portefeuille 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 RBC Portefeuille de are associated (or correlated) with PHN Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PHN Canadian Equity has no effect on the direction of RBC Portefeuille i.e., RBC Portefeuille and PHN Canadian go up and down completely randomly.

Pair Corralation between RBC Portefeuille and PHN Canadian

Assuming the 90 days trading horizon RBC Portefeuille de is expected to under-perform the PHN Canadian. But the fund apears to be less risky and, when comparing its historical volatility, RBC Portefeuille de is 1.01 times less risky than PHN Canadian. The fund trades about -0.08 of its potential returns per unit of risk. The PHN Canadian Equity is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  2,287  in PHN Canadian Equity on November 29, 2024 and sell it today you would lose (71.00) from holding PHN Canadian Equity or give up 3.1% of portfolio value over 90 days.

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

RBC Portefeuille de  vs.  PHN Canadian Equity

RBC Portefeuille

Risk-Adjusted Performance

Very Weak

Over the last 90 days RBC Portefeuille de has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong basic indicators, RBC Portefeuille is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

PHN Canadian Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days PHN Canadian Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of very healthy basic indicators, PHN Canadian is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with RBC Portefeuille and PHN Canadian

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

The idea behind RBC Portefeuille de and PHN Canadian Equity 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.