Correlation Between The National and Rbc Bluebay

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

By analyzing existing cross correlation between The National Tax Free and Rbc Bluebay Core, you can compare the effects of market volatilities on The National and Rbc Bluebay 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 The National with a short position of Rbc Bluebay. Check out your portfolio center. Please also check ongoing floating volatility patterns of The National and Rbc Bluebay.

Diversification Opportunities for The National and Rbc Bluebay

0.83

Correlation Coefficient

The National  Rbc Bluebay

Very poor diversification

The 3 months correlation between The and Rbc is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding The National Tax Free and Rbc Bluebay Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rbc Bluebay Core and The National 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 The National Tax Free are associated (or correlated) with Rbc Bluebay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rbc Bluebay Core has no effect on the direction of The National i.e., The National and Rbc Bluebay go up and down completely randomly.

Pair Corralation between The National and Rbc Bluebay

Assuming the 90 days horizon The National is expected to generate 6.0 times less return on investment than Rbc Bluebay. But when comparing it to its historical volatility, The National Tax Free is 1.81 times less risky than Rbc Bluebay. It trades about 0.02 of its potential returns per unit of risk. Rbc Bluebay Core is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  843.00  in Rbc Bluebay Core on October 7, 2024 and sell it today you would earn a total of  40.00  from holding Rbc Bluebay Core or generate 4.74% return on investment over 90 days.

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

The National Tax Free  vs.  Rbc Bluebay Core

National Tax

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The National Tax Free has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, The National is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Rbc Bluebay Core

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rbc Bluebay Core has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Rbc Bluebay is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with The National and Rbc Bluebay

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

The idea behind The National Tax Free and Rbc Bluebay Core 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.