Correlation Between RBC Global and Capital Group

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

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

Diversification Opportunities for RBC Global and Capital Group

0.96

Correlation Coefficient

RBC Global  Capital Group

Almost no diversification

The 3 months correlation between RBC and Capital is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding RBC Global Equity and Capital Group Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Group Global 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 Equity are associated (or correlated) with Capital Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Group Global has no effect on the direction of RBC Global i.e., RBC Global and Capital Group go up and down completely randomly.

Pair Corralation between RBC Global and Capital Group

Assuming the 90 days trading horizon RBC Global Equity is expected to generate 1.0 times more return on investment than Capital Group. However, RBC Global Equity is 1.0 times less risky than Capital Group. It trades about 0.25 of its potential returns per unit of risk. Capital Group Global is currently generating about 0.21 per unit of risk. If you would invest  2,526  in RBC Global Equity on September 4, 2024 and sell it today you would earn a total of  290.00  from holding RBC Global Equity or generate 11.48% return on investment over 90 days.

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

RBC Global Equity  vs.  Capital Group Global

RBC Global Equity

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Global Equity are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat weak basic indicators, RBC Global may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Capital Group Global

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Group Global are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat weak technical and fundamental indicators, Capital Group may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with RBC Global and Capital Group

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

The idea behind RBC Global Equity and Capital Group Global 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.