Correlation Between Royal Canadian and IShares Fundamental

Can any of the company-specific risk be diversified away by investing in both Royal Canadian and IShares Fundamental 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 Royal Canadian and IShares Fundamental into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Royal Canadian Mint and iShares Fundamental Hedged, you can compare the effects of market volatilities on Royal Canadian and IShares Fundamental 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 Royal Canadian with a short position of IShares Fundamental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Canadian and IShares Fundamental.

Diversification Opportunities for Royal Canadian and IShares Fundamental

-0.33

Correlation Coefficient

Royal Canadian  IShares Fundamental

Very good diversification

The 3 months correlation between Royal and IShares is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Royal Canadian Mint and iShares Fundamental Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Fundamental and Royal Canadian 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 Royal Canadian Mint are associated (or correlated) with IShares Fundamental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Fundamental has no effect on the direction of Royal Canadian i.e., Royal Canadian and IShares Fundamental go up and down completely randomly.

Pair Corralation between Royal Canadian and IShares Fundamental

Assuming the 90 days trading horizon Royal Canadian Mint is expected to generate 1.34 times more return on investment than IShares Fundamental. However, Royal Canadian is 1.34 times more volatile than iShares Fundamental Hedged. It trades about 0.09 of its potential returns per unit of risk. iShares Fundamental Hedged is currently generating about 0.07 per unit of risk. If you would invest  2,708  in Royal Canadian Mint on October 14, 2024 and sell it today you would earn a total of  1,342  from holding Royal Canadian Mint or generate 49.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Royal Canadian Mint  vs.  iShares Fundamental Hedged

Royal Canadian Mint

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Royal Canadian Mint are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Royal Canadian may actually be approaching a critical reversion point that can send shares even higher in February 2025.

iShares Fundamental

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Royal Canadian and IShares Fundamental

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

The idea behind Royal Canadian Mint and iShares Fundamental Hedged 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.