Correlation Between Capital World and Rbc Emerging

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

By analyzing existing cross correlation between Capital World Bond and Rbc Emerging Markets, you can compare the effects of market volatilities on Capital World and Rbc Emerging 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 Capital World with a short position of Rbc Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital World and Rbc Emerging.

Diversification Opportunities for Capital World and Rbc Emerging

0.91

Correlation Coefficient

Capital World  Rbc Emerging

Almost no diversification

The 3 months correlation between CAPITAL and Rbc is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Capital World Bond and Rbc Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rbc Emerging Markets and Capital World 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 Capital World Bond are associated (or correlated) with Rbc Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rbc Emerging Markets has no effect on the direction of Capital World i.e., Capital World and Rbc Emerging go up and down completely randomly.

Pair Corralation between Capital World and Rbc Emerging

Assuming the 90 days horizon Capital World is expected to generate 3.92 times less return on investment than Rbc Emerging. But when comparing it to its historical volatility, Capital World Bond is 3.34 times less risky than Rbc Emerging. It trades about 0.12 of its potential returns per unit of risk. Rbc Emerging Markets is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  785.00  in Rbc Emerging Markets on December 28, 2024 and sell it today you would earn a total of  69.00  from holding Rbc Emerging Markets or generate 8.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.36%
Values	Daily Returns

Capital World Bond  vs.  Rbc Emerging Markets

Capital World Bond

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Capital World Bond are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Capital World is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Rbc Emerging Markets

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rbc Emerging Markets are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Rbc Emerging may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Capital World and Rbc Emerging

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

The idea behind Capital World Bond and Rbc Emerging Markets 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.