Correlation Between RBC Select and IA Clarington

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

Diversification Opportunities for RBC Select and IA Clarington

0.26

Correlation Coefficient

RBC Select  IA Clarington

Modest diversification

The 3 months correlation between RBC and ISCB is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding RBC Select Balanced and IA Clarington Strategic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IA Clarington Strategic 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 IA Clarington. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IA Clarington Strategic has no effect on the direction of RBC Select i.e., RBC Select and IA Clarington go up and down completely randomly.

Pair Corralation between RBC Select and IA Clarington

Assuming the 90 days trading horizon RBC Select Balanced is expected to generate 3.21 times more return on investment than IA Clarington. However, RBC Select is 3.21 times more volatile than IA Clarington Strategic. It trades about 0.03 of its potential returns per unit of risk. IA Clarington Strategic is currently generating about 0.06 per unit of risk. If you would invest  3,379  in RBC Select Balanced on December 22, 2024 and sell it today you would earn a total of  24.00  from holding RBC Select Balanced or generate 0.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

RBC Select Balanced  vs.  IA Clarington Strategic

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 2 (%) 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 current stock price disturbance, may contribute to short-term losses for the investors.

IA Clarington Strategic

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in IA Clarington Strategic are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of very healthy basic indicators, IA Clarington 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 Select and IA Clarington

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

The idea behind RBC Select Balanced and IA Clarington Strategic 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.