Correlation Between RBC Canadian and Fidelity Tactical

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

Diversification Opportunities for RBC Canadian and Fidelity Tactical

0.83

Correlation Coefficient

RBC Canadian  Fidelity Tactical

Very poor diversification

The 3 months correlation between RBC and Fidelity is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding RBC Canadian Equity and Fidelity Tactical High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Tactical High 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 Fidelity Tactical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Tactical High has no effect on the direction of RBC Canadian i.e., RBC Canadian and Fidelity Tactical go up and down completely randomly.

Pair Corralation between RBC Canadian and Fidelity Tactical

Assuming the 90 days trading horizon RBC Canadian is expected to generate 2.42 times less return on investment than Fidelity Tactical. But when comparing it to its historical volatility, RBC Canadian Equity is 1.38 times less risky than Fidelity Tactical. It trades about 0.16 of its potential returns per unit of risk. Fidelity Tactical High is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  1,009  in Fidelity Tactical High on September 13, 2024 and sell it today you would earn a total of  100.00  from holding Fidelity Tactical High or generate 9.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.41%
Values	Daily Returns

RBC Canadian Equity  vs.  Fidelity Tactical High

RBC Canadian Equity

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Canadian Equity are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. 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.

Fidelity Tactical High

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Tactical High are ranked lower than 21 (%) of all funds and portfolios of funds over the last 90 days. In spite of very fragile basic indicators, Fidelity Tactical may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with RBC Canadian and Fidelity Tactical

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

The idea behind RBC Canadian Equity and Fidelity Tactical High 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.