Correlation Between Desjardins and RBC PHN
Can any of the company-specific risk be diversified away by investing in both Desjardins and RBC PHN 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 Desjardins and RBC PHN into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Desjardins 1 5 Year and RBC PHN Short, you can compare the effects of market volatilities on Desjardins and RBC PHN 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 Desjardins with a short position of RBC PHN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Desjardins and RBC PHN.
Diversification Opportunities for Desjardins and RBC PHN
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Desjardins and RBC is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Desjardins 1 5 Year and RBC PHN Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC PHN Short and Desjardins 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 Desjardins 1 5 Year are associated (or correlated) with RBC PHN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBC PHN Short has no effect on the direction of Desjardins i.e., Desjardins and RBC PHN go up and down completely randomly.
Pair Corralation between Desjardins and RBC PHN
Assuming the 90 days trading horizon Desjardins 1 5 Year is expected to generate 1.26 times more return on investment than RBC PHN. However, Desjardins is 1.26 times more volatile than RBC PHN Short. It trades about 0.19 of its potential returns per unit of risk. RBC PHN Short is currently generating about 0.21 per unit of risk. If you would invest 1,825 in Desjardins 1 5 Year on December 2, 2024 and sell it today you would earn a total of 25.00 from holding Desjardins 1 5 Year or generate 1.37% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Desjardins 1 5 Year vs. RBC PHN Short
Performance |
Timeline |
Desjardins 1 5 |
RBC PHN Short |
Desjardins and RBC PHN Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Desjardins and RBC PHN
The main advantage of trading using opposite Desjardins and RBC PHN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Desjardins position performs unexpectedly, RBC PHN 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 PHN will offset losses from the drop in RBC PHN's long position.Desjardins vs. Desjardins American Equity | Desjardins vs. Desjardins RI Canada | Desjardins vs. Desjardins RI Canada | Desjardins vs. Desjardins Canadian Corporate |
Check out your portfolio center.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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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