Correlation Between Guardian Investment and RBC Select

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

By analyzing existing cross correlation between Guardian Investment Grade and RBC Select Balanced, you can compare the effects of market volatilities on Guardian Investment and RBC Select 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 Guardian Investment with a short position of RBC Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guardian Investment and RBC Select.

Diversification Opportunities for Guardian Investment and RBC Select

-0.24

Correlation Coefficient

Guardian Investment  RBC Select

Very good diversification

The 3 months correlation between Guardian and RBC is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Guardian Investment Grade and RBC Select Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Select Balanced and Guardian Investment 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 Guardian Investment Grade are associated (or correlated) with RBC Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBC Select Balanced has no effect on the direction of Guardian Investment i.e., Guardian Investment and RBC Select go up and down completely randomly.

Pair Corralation between Guardian Investment and RBC Select

Assuming the 90 days trading horizon Guardian Investment Grade is expected to generate 3.12 times more return on investment than RBC Select. However, Guardian Investment is 3.12 times more volatile than RBC Select Balanced. It trades about 0.14 of its potential returns per unit of risk. RBC Select Balanced is currently generating about 0.02 per unit of risk. If you would invest  2,166  in Guardian Investment Grade on December 23, 2024 and sell it today you would earn a total of  280.00  from holding Guardian Investment Grade or generate 12.93% return on investment over 90 days.

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

Guardian Investment Grade  vs.  RBC Select Balanced

Guardian Investment Grade

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guardian Investment Grade are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of very weak basic indicators, Guardian Investment displayed solid returns over the last few months and may actually be approaching a breakup point.

RBC Select Balanced

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Select Balanced are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong basic indicators, RBC Select is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Guardian Investment and RBC Select

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

The idea behind Guardian Investment Grade and RBC Select Balanced 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.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.