Correlation Between RBC Select and Invesco Global

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

By analyzing existing cross correlation between RBC Select Balanced and Invesco Global Companies, you can compare the effects of market volatilities on RBC Select and Invesco Global 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 Select with a short position of Invesco Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of RBC Select and Invesco Global.

Diversification Opportunities for RBC Select and Invesco Global

0.86

Correlation Coefficient

RBC Select  Invesco Global

Very poor diversification

The 3 months correlation between RBC and Invesco is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding RBC Select Balanced and Invesco Global Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Global Companies and RBC Select 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 Select Balanced are associated (or correlated) with Invesco Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Global Companies has no effect on the direction of RBC Select i.e., RBC Select and Invesco Global go up and down completely randomly.

Pair Corralation between RBC Select and Invesco Global

Assuming the 90 days trading horizon RBC Select Balanced is expected to generate 0.49 times more return on investment than Invesco Global. However, RBC Select Balanced is 2.04 times less risky than Invesco Global. It trades about -0.32 of its potential returns per unit of risk. Invesco Global Companies is currently generating about -0.23 per unit of risk. If you would invest  3,557  in RBC Select Balanced on October 11, 2024 and sell it today you would lose (187.00) from holding RBC Select Balanced or give up 5.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	94.74%
Values	Daily Returns

RBC Select Balanced  vs.  Invesco Global Companies

RBC Select Balanced

Risk-Adjusted Performance

0 of 100

Very Weak

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

Invesco Global Companies

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with RBC Select and Invesco Global

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

The idea behind RBC Select Balanced and Invesco Global Companies 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.