Correlation Between Lsv Small and Rbc Bluebay

Can any of the company-specific risk be diversified away by investing in both Lsv Small and Rbc Bluebay 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 Lsv Small and Rbc Bluebay into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lsv Small Cap and Rbc Bluebay Emerging, you can compare the effects of market volatilities on Lsv Small and Rbc Bluebay 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 Lsv Small with a short position of Rbc Bluebay. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lsv Small and Rbc Bluebay.

Diversification Opportunities for Lsv Small and Rbc Bluebay

-0.35

Correlation Coefficient

Lsv Small  Rbc Bluebay

Very good diversification

The 3 months correlation between Lsv and Rbc is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Lsv Small Cap and Rbc Bluebay Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rbc Bluebay Emerging and Lsv Small 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 Lsv Small Cap are associated (or correlated) with Rbc Bluebay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rbc Bluebay Emerging has no effect on the direction of Lsv Small i.e., Lsv Small and Rbc Bluebay go up and down completely randomly.

Pair Corralation between Lsv Small and Rbc Bluebay

Assuming the 90 days horizon Lsv Small Cap is expected to under-perform the Rbc Bluebay. But the mutual fund apears to be less risky and, when comparing its historical volatility, Lsv Small Cap is 1.18 times less risky than Rbc Bluebay. The mutual fund trades about -0.5 of its potential returns per unit of risk. The Rbc Bluebay Emerging is currently generating about -0.25 of returns per unit of risk over similar time horizon. If you would invest  1,290  in Rbc Bluebay Emerging on September 26, 2024 and sell it today you would lose (81.00) from holding Rbc Bluebay Emerging or give up 6.28% of portfolio value over 90 days.

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

Lsv Small Cap  vs.  Rbc Bluebay Emerging

Lsv Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lsv Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Lsv Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Rbc Bluebay Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rbc Bluebay Emerging has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Lsv Small and Rbc Bluebay

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

The idea behind Lsv Small Cap and Rbc Bluebay Emerging 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.