Correlation Between RBC Select and Manulife Dividend

Can any of the company-specific risk be diversified away by investing in both RBC Select and Manulife Dividend 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 Manulife Dividend 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 Manulife Dividend Income, you can compare the effects of market volatilities on RBC Select and Manulife Dividend 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 Manulife Dividend. Check out your portfolio center. Please also check ongoing floating volatility patterns of RBC Select and Manulife Dividend.

Diversification Opportunities for RBC Select and Manulife Dividend

0.92

Correlation Coefficient

RBC Select  Manulife Dividend

Almost no diversification

The 3 months correlation between RBC and Manulife is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding RBC Select Balanced and Manulife Dividend Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manulife Dividend Income 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 Manulife Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Manulife Dividend Income has no effect on the direction of RBC Select i.e., RBC Select and Manulife Dividend go up and down completely randomly.

Pair Corralation between RBC Select and Manulife Dividend

Assuming the 90 days trading horizon RBC Select Balanced is expected to generate 0.6 times more return on investment than Manulife Dividend. However, RBC Select Balanced is 1.66 times less risky than Manulife Dividend. It trades about 0.06 of its potential returns per unit of risk. Manulife Dividend Income is currently generating about 0.01 per unit of risk. If you would invest  2,973  in RBC Select Balanced on October 11, 2024 and sell it today you would earn a total of  397.00  from holding RBC Select Balanced or generate 13.35% return on investment over 90 days.

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

RBC Select Balanced  vs.  Manulife Dividend Income

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.

Manulife Dividend Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Manulife Dividend Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest uncertain performance, the Fund's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the fund sophisticated investors.

Pair Trading with RBC Select and Manulife Dividend

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

The idea behind RBC Select Balanced and Manulife Dividend 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.