Correlation Between RBC Canadian and Tangerine Equity

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

By analyzing existing cross correlation between RBC Canadian Equity and Tangerine Equity Growth, you can compare the effects of market volatilities on RBC Canadian and Tangerine Equity 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 Canadian with a short position of Tangerine Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of RBC Canadian and Tangerine Equity.

Diversification Opportunities for RBC Canadian and Tangerine Equity

0.31

Correlation Coefficient

RBC Canadian  Tangerine Equity

Weak diversification

The 3 months correlation between RBC and Tangerine is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding RBC Canadian Equity and Tangerine Equity Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tangerine Equity Growth and RBC Canadian 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 Canadian Equity are associated (or correlated) with Tangerine Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tangerine Equity Growth has no effect on the direction of RBC Canadian i.e., RBC Canadian and Tangerine Equity go up and down completely randomly.

Pair Corralation between RBC Canadian and Tangerine Equity

Assuming the 90 days trading horizon RBC Canadian Equity is expected to under-perform the Tangerine Equity. But the fund apears to be less risky and, when comparing its historical volatility, RBC Canadian Equity is 1.14 times less risky than Tangerine Equity. The fund trades about -0.33 of its potential returns per unit of risk. The Tangerine Equity Growth is currently generating about -0.17 of returns per unit of risk over similar time horizon. If you would invest  1,480  in Tangerine Equity Growth on October 5, 2024 and sell it today you would lose (32.00) from holding Tangerine Equity Growth or give up 2.16% of portfolio value over 90 days.

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

RBC Canadian Equity  vs.  Tangerine Equity Growth

RBC Canadian Equity

Risk-Adjusted Performance

0 of 100

Very Weak

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

Tangerine Equity Growth

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tangerine Equity Growth are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. Despite quite persistent forward-looking signals, Tangerine Equity is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with RBC Canadian and Tangerine Equity

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

The idea behind RBC Canadian Equity and Tangerine Equity 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.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.