Correlation Between Citadel Income and RBC Discount

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

By analyzing existing cross correlation between Citadel Income and RBC Discount Bond, you can compare the effects of market volatilities on Citadel Income and RBC Discount 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 Citadel Income with a short position of RBC Discount. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citadel Income and RBC Discount.

Diversification Opportunities for Citadel Income and RBC Discount

0.48

Correlation Coefficient

Citadel Income  RBC Discount

Very weak diversification

The 3 months correlation between Citadel and RBC is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Citadel Income and RBC Discount Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Discount Bond and Citadel Income 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 Citadel Income are associated (or correlated) with RBC Discount. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBC Discount Bond has no effect on the direction of Citadel Income i.e., Citadel Income and RBC Discount go up and down completely randomly.

Pair Corralation between Citadel Income and RBC Discount

Assuming the 90 days trading horizon Citadel Income is expected to generate 5.81 times more return on investment than RBC Discount. However, Citadel Income is 5.81 times more volatile than RBC Discount Bond. It trades about 0.07 of its potential returns per unit of risk. RBC Discount Bond is currently generating about 0.05 per unit of risk. If you would invest  251.00  in Citadel Income on December 30, 2024 and sell it today you would earn a total of  25.00  from holding Citadel Income or generate 9.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.88%
Values	Daily Returns

Citadel Income  vs.  RBC Discount Bond

Citadel Income

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Citadel Income are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat weak technical and fundamental indicators, Citadel Income may actually be approaching a critical reversion point that can send shares even higher in April 2025.

RBC Discount Bond

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Discount Bond are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, RBC Discount is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Citadel Income and RBC Discount

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

The idea behind Citadel Income and RBC Discount Bond 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.