Correlation Between Rbc Global and Federated Kaufmann

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

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

Diversification Opportunities for Rbc Global and Federated Kaufmann

0.79

Correlation Coefficient

Rbc Global  Federated Kaufmann

Poor diversification

The 3 months correlation between Rbc and Federated is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Rbc Global Equity and Federated Kaufmann Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Kaufmann Large and Rbc Global 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 Global Equity are associated (or correlated) with Federated Kaufmann. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Kaufmann Large has no effect on the direction of Rbc Global i.e., Rbc Global and Federated Kaufmann go up and down completely randomly.

Pair Corralation between Rbc Global and Federated Kaufmann

Assuming the 90 days horizon Rbc Global Equity is expected to generate 0.67 times more return on investment than Federated Kaufmann. However, Rbc Global Equity is 1.5 times less risky than Federated Kaufmann. It trades about -0.01 of its potential returns per unit of risk. Federated Kaufmann Large is currently generating about -0.08 per unit of risk. If you would invest  1,060  in Rbc Global Equity on December 20, 2024 and sell it today you would lose (10.00) from holding Rbc Global Equity or give up 0.94% of portfolio value over 90 days.

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

Rbc Global Equity  vs.  Federated Kaufmann Large

Rbc Global Equity

Risk-Adjusted Performance

Very Weak

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

Federated Kaufmann Large

Risk-Adjusted Performance

Very Weak

Over the last 90 days Federated Kaufmann Large 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 Global and Federated Kaufmann

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

The idea behind Rbc Global Equity and Federated Kaufmann Large 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.