Correlation Between RBC Select and Fidelity Canadian

Can any of the company-specific risk be diversified away by investing in both RBC Select and Fidelity 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 Select and Fidelity Canadian 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 Fidelity Canadian Growth, you can compare the effects of market volatilities on RBC Select and Fidelity 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 Select with a short position of Fidelity Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of RBC Select and Fidelity Canadian.

Diversification Opportunities for RBC Select and Fidelity Canadian

0.75

Correlation Coefficient

RBC Select  Fidelity Canadian

Poor diversification

The 3 months correlation between RBC and Fidelity is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding RBC Select Balanced and Fidelity Canadian Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Canadian Growth 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 Fidelity Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Canadian Growth has no effect on the direction of RBC Select i.e., RBC Select and Fidelity Canadian go up and down completely randomly.

Pair Corralation between RBC Select and Fidelity Canadian

Assuming the 90 days trading horizon RBC Select Balanced is expected to generate 0.29 times more return on investment than Fidelity Canadian. However, RBC Select Balanced is 3.43 times less risky than Fidelity Canadian. It trades about -0.09 of its potential returns per unit of risk. Fidelity Canadian Growth is currently generating about -0.11 per unit of risk. If you would invest  3,547  in RBC Select Balanced on December 2, 2024 and sell it today you would lose (124.00) from holding RBC Select Balanced or give up 3.5% of portfolio value over 90 days.

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

RBC Select Balanced  vs.  Fidelity Canadian Growth

RBC Select Balanced

Risk-Adjusted Performance

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.

Fidelity Canadian Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity Canadian Growth has generated negative risk-adjusted returns adding no value to fund investors. Despite weak performance in the last few months, the Fund's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with RBC Select and Fidelity Canadian

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

The idea behind RBC Select Balanced and Fidelity Canadian Growth 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.