Correlation Between Global Healthcare and RBC Select

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

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

Diversification Opportunities for Global Healthcare and RBC Select

0.37

Correlation Coefficient

Global Healthcare  RBC Select

Weak diversification

The 3 months correlation between Global and RBC is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Global Healthcare Income 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 Global Healthcare 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 Healthcare Income 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 Global Healthcare i.e., Global Healthcare and RBC Select go up and down completely randomly.

Pair Corralation between Global Healthcare and RBC Select

Assuming the 90 days trading horizon Global Healthcare Income is expected to generate 1.46 times more return on investment than RBC Select. However, Global Healthcare is 1.46 times more volatile than RBC Select Balanced. It trades about 0.19 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  747.00  in Global Healthcare Income on December 30, 2024 and sell it today you would earn a total of  61.00  from holding Global Healthcare Income or generate 8.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.83%
Values	Daily Returns

Global Healthcare Income  vs.  RBC Select Balanced

Global Healthcare Income

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global Healthcare Income are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Global Healthcare may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Global Healthcare and RBC Select

The main advantage of trading using opposite Global Healthcare and RBC Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Healthcare 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 Global Healthcare Income 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.