Correlation Between Global X and RBC Target

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

By analyzing existing cross correlation between Global X Active and RBC Target 2029, you can compare the effects of market volatilities on Global X and RBC Target 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 Global X with a short position of RBC Target. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and RBC Target.

Diversification Opportunities for Global X and RBC Target

0.82

Correlation Coefficient

Global X  RBC Target

Very poor diversification

The 3 months correlation between Global and RBC is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Global X Active and RBC Target 2029 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Target 2029 and Global X 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 Global X Active are associated (or correlated) with RBC Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBC Target 2029 has no effect on the direction of Global X i.e., Global X and RBC Target go up and down completely randomly.

Pair Corralation between Global X and RBC Target

Assuming the 90 days trading horizon Global X Active is expected to generate 1.33 times more return on investment than RBC Target. However, Global X is 1.33 times more volatile than RBC Target 2029. It trades about 0.1 of its potential returns per unit of risk. RBC Target 2029 is currently generating about 0.01 per unit of risk. If you would invest  1,011  in Global X Active on December 26, 2024 and sell it today you would earn a total of  22.00  from holding Global X Active or generate 2.18% return on investment over 90 days.

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

Global X Active  vs.  RBC Target 2029

Global X Active

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Active are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental drivers, Global X is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

RBC Target 2029

Risk-Adjusted Performance

Very Weak

Over the last 90 days RBC Target 2029 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, RBC Target is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Global X and RBC Target

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

The idea behind Global X Active and RBC Target 2029 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.