Correlation Between City National and M Large

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

By analyzing existing cross correlation between City National Rochdale and M Large Cap, you can compare the effects of market volatilities on City National and M Large 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 City National with a short position of M Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of City National and M Large.

Diversification Opportunities for City National and M Large

0.72

Correlation Coefficient

City National  M Large

Poor diversification

The 3 months correlation between City and MTCGX is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding City National Rochdale and M Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on M Large Cap and City 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 City National Rochdale are associated (or correlated) with M Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of M Large Cap has no effect on the direction of City National i.e., City National and M Large go up and down completely randomly.

Pair Corralation between City National and M Large

Assuming the 90 days horizon City National Rochdale is expected to generate 0.33 times more return on investment than M Large. However, City National Rochdale is 3.02 times less risky than M Large. It trades about 0.08 of its potential returns per unit of risk. M Large Cap is currently generating about -0.15 per unit of risk. If you would invest  2,485  in City National Rochdale on October 23, 2024 and sell it today you would earn a total of  29.00  from holding City National Rochdale or generate 1.17% return on investment over 90 days.

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

City National Rochdale  vs.  M Large Cap

City National Rochdale

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days City National Rochdale has generated negative risk-adjusted returns adding no value to fund investors. In spite of 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.

M Large Cap

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with City National and M Large

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

The idea behind City National Rochdale and M Large Cap 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.