Correlation Between RBC Global and RBC European

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

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

Diversification Opportunities for RBC Global and RBC European

-0.56

Correlation Coefficient

RBC Global  RBC European

Excellent diversification

The 3 months correlation between RBC and RBC is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding RBC Global Technology and RBC European Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC European Mid and RBC Global 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 Global Technology are associated (or correlated) with RBC European. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBC European Mid has no effect on the direction of RBC Global i.e., RBC Global and RBC European go up and down completely randomly.

Pair Corralation between RBC Global and RBC European

Assuming the 90 days trading horizon RBC Global Technology is expected to generate 1.51 times more return on investment than RBC European. However, RBC Global is 1.51 times more volatile than RBC European Mid Cap. It trades about 0.2 of its potential returns per unit of risk. RBC European Mid Cap is currently generating about -0.09 per unit of risk. If you would invest  1,527  in RBC Global Technology on August 31, 2024 and sell it today you would earn a total of  213.00  from holding RBC Global Technology or generate 13.95% return on investment over 90 days.

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

RBC Global Technology  vs.  RBC European Mid Cap

RBC Global Technology

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Global Technology are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat weak basic indicators, RBC Global sustained solid returns over the last few months and may actually be approaching a breakup point.

RBC European Mid

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with RBC Global and RBC European

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

The idea behind RBC Global Technology and RBC European Mid Cap 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.

Check out your portfolio center.

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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.