Correlation Between Barclays PLC and Royal Bank

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

By analyzing existing cross correlation between Barclays PLC ADR and Royal Bank of, you can compare the effects of market volatilities on Barclays PLC and Royal Bank 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 Barclays PLC with a short position of Royal Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barclays PLC and Royal Bank.

Diversification Opportunities for Barclays PLC and Royal Bank

-0.52

Correlation Coefficient

Barclays PLC  Royal Bank

Excellent diversification

The 3 months correlation between Barclays and Royal is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Barclays PLC ADR and Royal Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royal Bank and Barclays PLC 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 Barclays PLC ADR are associated (or correlated) with Royal Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royal Bank has no effect on the direction of Barclays PLC i.e., Barclays PLC and Royal Bank go up and down completely randomly.

Pair Corralation between Barclays PLC and Royal Bank

Considering the 90-day investment horizon Barclays PLC ADR is expected to generate 1.89 times more return on investment than Royal Bank. However, Barclays PLC is 1.89 times more volatile than Royal Bank of. It trades about 0.14 of its potential returns per unit of risk. Royal Bank of is currently generating about -0.05 per unit of risk. If you would invest  1,306  in Barclays PLC ADR on December 28, 2024 and sell it today you would earn a total of  282.00  from holding Barclays PLC ADR or generate 21.59% return on investment over 90 days.

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

Barclays PLC ADR  vs.  Royal Bank of

Barclays PLC ADR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Barclays PLC ADR are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, Barclays PLC unveiled solid returns over the last few months and may actually be approaching a breakup point.

Royal Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Royal Bank of has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Royal Bank is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Barclays PLC and Royal Bank

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

The idea behind Barclays PLC ADR and Royal Bank of 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.