Correlation Between RBC Quant and RBC Canadian

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

By analyzing existing cross correlation between RBC Quant Canadian and RBC Canadian Preferred, you can compare the effects of market volatilities on RBC Quant and RBC Canadian 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 Quant with a short position of RBC Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of RBC Quant and RBC Canadian.

Diversification Opportunities for RBC Quant and RBC Canadian

0.5

Correlation Coefficient

RBC Quant  RBC Canadian

Very weak diversification

The 3 months correlation between RBC and RBC is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding RBC Quant Canadian and RBC Canadian Preferred in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Canadian Preferred and RBC Quant 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 Quant Canadian are associated (or correlated) with RBC Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBC Canadian Preferred has no effect on the direction of RBC Quant i.e., RBC Quant and RBC Canadian go up and down completely randomly.

Pair Corralation between RBC Quant and RBC Canadian

Assuming the 90 days trading horizon RBC Quant Canadian is expected to generate 1.53 times more return on investment than RBC Canadian. However, RBC Quant is 1.53 times more volatile than RBC Canadian Preferred. It trades about 0.24 of its potential returns per unit of risk. RBC Canadian Preferred is currently generating about 0.11 per unit of risk. If you would invest  2,764  in RBC Quant Canadian on September 4, 2024 and sell it today you would earn a total of  246.00  from holding RBC Quant Canadian or generate 8.9% return on investment over 90 days.

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

RBC Quant Canadian  vs.  RBC Canadian Preferred

RBC Quant Canadian

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Quant Canadian are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, RBC Quant may actually be approaching a critical reversion point that can send shares even higher in January 2025.

RBC Canadian Preferred

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Canadian Preferred are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, RBC Canadian is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with RBC Quant and RBC Canadian

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

The idea behind RBC Quant Canadian and RBC Canadian Preferred 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.