Correlation Between Global Healthcare and RBC Canadian

Can any of the company-specific risk be diversified away by investing in both Global Healthcare and RBC Canadian 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 Canadian 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 Canadian Equity, you can compare the effects of market volatilities on Global Healthcare and RBC Canadian 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 Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Healthcare and RBC Canadian.

Diversification Opportunities for Global Healthcare and RBC Canadian

0.2

Correlation Coefficient

Global Healthcare  RBC Canadian

Modest diversification

The 3 months correlation between Global and RBC is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Global Healthcare Income and RBC Canadian Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Canadian Equity 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 Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBC Canadian Equity has no effect on the direction of Global Healthcare i.e., Global Healthcare and RBC Canadian go up and down completely randomly.

Pair Corralation between Global Healthcare and RBC Canadian

Assuming the 90 days trading horizon Global Healthcare Income is expected to generate 1.07 times more return on investment than RBC Canadian. However, Global Healthcare is 1.07 times more volatile than RBC Canadian Equity. It trades about 0.19 of its potential returns per unit of risk. RBC Canadian Equity is currently generating about 0.07 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 Canadian Equity

Global Healthcare Income

Risk-Adjusted Performance

Good

Over the last 90 days Global Healthcare Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of very weak technical and fundamental indicators, Global Healthcare may actually be approaching a critical reversion point that can send shares even higher in April 2025.

RBC Canadian Equity

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Canadian Equity are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong basic indicators, RBC Canadian is not utilizing all of its potentials. The new stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Global Healthcare and RBC Canadian

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

The idea behind Global Healthcare Income and RBC Canadian Equity 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.