Correlation Between CI Enhanced and RBC Short

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

By analyzing existing cross correlation between CI Enhanced Government and RBC Short Term, you can compare the effects of market volatilities on CI Enhanced and RBC Short 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 CI Enhanced with a short position of RBC Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of CI Enhanced and RBC Short.

Diversification Opportunities for CI Enhanced and RBC Short

0.72

Correlation Coefficient

CI Enhanced  RBC Short

Poor diversification

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

Pair Corralation between CI Enhanced and RBC Short

Assuming the 90 days trading horizon CI Enhanced Government is expected to generate 0.82 times more return on investment than RBC Short. However, CI Enhanced Government is 1.22 times less risky than RBC Short. It trades about 0.11 of its potential returns per unit of risk. RBC Short Term is currently generating about 0.04 per unit of risk. If you would invest  980.00  in CI Enhanced Government on December 27, 2024 and sell it today you would earn a total of  24.00  from holding CI Enhanced Government or generate 2.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

CI Enhanced Government  vs.  RBC Short Term

CI Enhanced Government

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CI Enhanced Government are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, CI Enhanced is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

RBC Short Term

Risk-Adjusted Performance

Insignificant

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

Pair Trading with CI Enhanced and RBC Short

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

The idea behind CI Enhanced Government and RBC Short Term 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.