Correlation Between RBC European and RBC Global

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

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

Diversification Opportunities for RBC European and RBC Global

0.1

Correlation Coefficient

RBC European  RBC Global

Average diversification

The 3 months correlation between RBC and RBC is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding RBC European Mid Cap 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 RBC European 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 European Mid Cap 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 RBC European i.e., RBC European and RBC Global go up and down completely randomly.

Pair Corralation between RBC European and RBC Global

Assuming the 90 days trading horizon RBC European Mid Cap is expected to generate 0.5 times more return on investment than RBC Global. However, RBC European Mid Cap is 1.98 times less risky than RBC Global. It trades about 0.13 of its potential returns per unit of risk. RBC Global Equity is currently generating about -0.07 per unit of risk. If you would invest  1,325  in RBC European Mid Cap on November 20, 2024 and sell it today you would earn a total of  76.00  from holding RBC European Mid Cap or generate 5.74% return on investment over 90 days.

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

RBC European Mid Cap  vs.  RBC Global Equity

RBC European Mid

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RBC European Mid Cap are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong basic indicators, RBC European 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

Very Weak

Over the last 90 days RBC Global Equity has generated negative risk-adjusted returns adding no value to fund investors. Despite latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with RBC European and RBC Global

The main advantage of trading using opposite RBC European and RBC Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RBC European 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 RBC European Mid Cap 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 Anywhere module to track or share privately all of your investments from the convenience of any device.