Correlation Between RBC Select and PIMCO Canadian

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

Diversification Opportunities for RBC Select and PIMCO Canadian

0.39

Correlation Coefficient

RBC Select  PIMCO Canadian

Weak diversification

The 3 months correlation between RBC and PIMCO is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding RBC Select Balanced and PIMCO Canadian Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO Canadian Core 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 PIMCO Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIMCO Canadian Core has no effect on the direction of RBC Select i.e., RBC Select and PIMCO Canadian go up and down completely randomly.

Pair Corralation between RBC Select and PIMCO Canadian

Assuming the 90 days trading horizon RBC Select is expected to generate 3.84 times less return on investment than PIMCO Canadian. In addition to that, RBC Select is 1.31 times more volatile than PIMCO Canadian Core. It trades about 0.02 of its total potential returns per unit of risk. PIMCO Canadian Core is currently generating about 0.1 per unit of volatility. If you would invest  2,001  in PIMCO Canadian Core on December 30, 2024 and sell it today you would earn a total of  47.00  from holding PIMCO Canadian Core or generate 2.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

RBC Select Balanced  vs.  PIMCO Canadian Core

RBC Select Balanced

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Select Balanced are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong basic indicators, RBC Select is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

PIMCO Canadian Core

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PIMCO Canadian Core are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of very healthy basic indicators, PIMCO Canadian is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with RBC Select and PIMCO Canadian

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

The idea behind RBC Select Balanced and PIMCO Canadian Core 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.