Correlation Between Rbc China and Small Cap

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

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

Diversification Opportunities for Rbc China and Small Cap

-0.59

Correlation Coefficient

Rbc China  Small Cap

Excellent diversification

The 3 months correlation between Rbc and Small is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Rbc China Equity and Small Cap Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Equity and Rbc China 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 Rbc China Equity are associated (or correlated) with Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Equity has no effect on the direction of Rbc China i.e., Rbc China and Small Cap go up and down completely randomly.

Pair Corralation between Rbc China and Small Cap

Assuming the 90 days horizon Rbc China Equity is expected to generate 1.56 times more return on investment than Small Cap. However, Rbc China is 1.56 times more volatile than Small Cap Equity. It trades about 0.16 of its potential returns per unit of risk. Small Cap Equity is currently generating about -0.15 per unit of risk. If you would invest  860.00  in Rbc China Equity on December 19, 2024 and sell it today you would earn a total of  146.00  from holding Rbc China Equity or generate 16.98% return on investment over 90 days.

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

Rbc China Equity  vs.  Small Cap Equity

Rbc China Equity

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rbc China Equity are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Rbc China showed solid returns over the last few months and may actually be approaching a breakup point.

Small Cap Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Small Cap Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Rbc China and Small Cap

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

The idea behind Rbc China Equity and Small Cap 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.