Correlation Between Royal Canadian and Fortis Pref

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

Diversification Opportunities for Royal Canadian and Fortis Pref

0.34

Correlation Coefficient

Royal Canadian  Fortis Pref

Weak diversification

The 3 months correlation between Royal and Fortis is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Royal Canadian Mint and Fortis Pref M in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortis Pref M 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 Fortis Pref. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortis Pref M has no effect on the direction of Royal Canadian i.e., Royal Canadian and Fortis Pref go up and down completely randomly.

Pair Corralation between Royal Canadian and Fortis Pref

Assuming the 90 days trading horizon Royal Canadian Mint is expected to generate 1.33 times more return on investment than Fortis Pref. However, Royal Canadian is 1.33 times more volatile than Fortis Pref M. It trades about 0.14 of its potential returns per unit of risk. Fortis Pref M is currently generating about 0.11 per unit of risk. If you would invest  2,750  in Royal Canadian Mint on August 31, 2024 and sell it today you would earn a total of  1,072  from holding Royal Canadian Mint or generate 38.98% return on investment over 90 days.

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

Royal Canadian Mint  vs.  Fortis Pref M

Royal Canadian Mint

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Royal Canadian Mint are ranked lower than 11 (%) 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 December 2024.

Fortis Pref M

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fortis Pref M has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Fortis Pref is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Royal Canadian and Fortis Pref

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

The idea behind Royal Canadian Mint and Fortis Pref M 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.