Correlation Between Rbc China and Transamerica Intl

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

Diversification Opportunities for Rbc China and Transamerica Intl

0.77

Correlation Coefficient

Rbc China  Transamerica Intl

Poor diversification

The 3 months correlation between Rbc and Transamerica is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Rbc China Equity and Transamerica Intl Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Intl 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 Transamerica Intl. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Intl Equity has no effect on the direction of Rbc China i.e., Rbc China and Transamerica Intl go up and down completely randomly.

Pair Corralation between Rbc China and Transamerica Intl

Assuming the 90 days horizon Rbc China Equity is expected to under-perform the Transamerica Intl. In addition to that, Rbc China is 1.44 times more volatile than Transamerica Intl Equity. It trades about -0.5 of its total potential returns per unit of risk. Transamerica Intl Equity is currently generating about -0.36 per unit of volatility. If you would invest  2,195  in Transamerica Intl Equity on October 10, 2024 and sell it today you would lose (134.00) from holding Transamerica Intl Equity or give up 6.1% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Rbc China Equity  vs.  Transamerica Intl Equity

Rbc China Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rbc China Equity 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 forward indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Transamerica Intl Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transamerica Intl 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 Transamerica Intl

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

The idea behind Rbc China Equity and Transamerica Intl 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.