Correlation Between Mawer Global and RBC Global

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

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

Diversification Opportunities for Mawer Global and RBC Global

0.51

Correlation Coefficient

Mawer Global  RBC Global

Very weak diversification

The 3 months correlation between Mawer and RBC is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Mawer Global Small and RBC Global Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Global Equity and Mawer 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 Mawer Global Small are associated (or correlated) with RBC Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBC Global Equity has no effect on the direction of Mawer Global i.e., Mawer Global and RBC Global go up and down completely randomly.

Pair Corralation between Mawer Global and RBC Global

Assuming the 90 days trading horizon Mawer Global is expected to generate 1.29 times less return on investment than RBC Global. But when comparing it to its historical volatility, Mawer Global Small is 1.04 times less risky than RBC Global. It trades about 0.15 of its potential returns per unit of risk. RBC Global Equity is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  2,567  in RBC Global Equity on October 26, 2024 and sell it today you would earn a total of  82.00  from holding RBC Global Equity or generate 3.19% return on investment over 90 days.

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

Mawer Global Small  vs.  RBC Global Equity

Mawer Global Small

Risk-Adjusted Performance

0 of 100

Very Weak

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

RBC Global Equity

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Mawer Global and RBC Global

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

The idea behind Mawer Global Small and RBC Global Equity 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.