Correlation Between Rbc Bluebay and Rbc Smid

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

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

Diversification Opportunities for Rbc Bluebay and Rbc Smid

0.25

Correlation Coefficient

Rbc Bluebay  Rbc Smid

Modest diversification

The 3 months correlation between Rbc and Rbc is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Rbc Bluebay Core and Rbc Smid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rbc Smid Cap and Rbc Bluebay 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 Bluebay Core are associated (or correlated) with Rbc Smid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rbc Smid Cap has no effect on the direction of Rbc Bluebay i.e., Rbc Bluebay and Rbc Smid go up and down completely randomly.

Pair Corralation between Rbc Bluebay and Rbc Smid

Assuming the 90 days horizon Rbc Bluebay is expected to generate 1.92 times less return on investment than Rbc Smid. But when comparing it to its historical volatility, Rbc Bluebay Core is 2.94 times less risky than Rbc Smid. It trades about 0.06 of its potential returns per unit of risk. Rbc Smid Cap is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,370  in Rbc Smid Cap on September 30, 2024 and sell it today you would earn a total of  281.00  from holding Rbc Smid Cap or generate 20.51% return on investment over 90 days.

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

Rbc Bluebay Core  vs.  Rbc Smid Cap

Rbc Bluebay Core

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rbc Bluebay Core has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Rbc Bluebay is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Rbc Smid Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rbc Smid Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Rbc Smid is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Rbc Bluebay and Rbc Smid

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

The idea behind Rbc Bluebay Core and Rbc Smid Cap 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.