Correlation Between RBC Quant and RBC PHN

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

By analyzing existing cross correlation between RBC Quant EAFE and RBC PHN Short, you can compare the effects of market volatilities on RBC Quant and RBC PHN 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 PHN. Check out your portfolio center. Please also check ongoing floating volatility patterns of RBC Quant and RBC PHN.

Diversification Opportunities for RBC Quant and RBC PHN

0.94

Correlation Coefficient

RBC Quant  RBC PHN

Almost no diversification

The 3 months correlation between RBC and RBC is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding RBC Quant EAFE and RBC PHN Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC PHN Short 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 EAFE are associated (or correlated) with RBC PHN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBC PHN Short has no effect on the direction of RBC Quant i.e., RBC Quant and RBC PHN go up and down completely randomly.

Pair Corralation between RBC Quant and RBC PHN

Assuming the 90 days trading horizon RBC Quant EAFE is expected to generate 4.16 times more return on investment than RBC PHN. However, RBC Quant is 4.16 times more volatile than RBC PHN Short. It trades about 0.18 of its potential returns per unit of risk. RBC PHN Short is currently generating about 0.16 per unit of risk. If you would invest  2,876  in RBC Quant EAFE on December 28, 2024 and sell it today you would earn a total of  215.00  from holding RBC Quant EAFE or generate 7.48% return on investment over 90 days.

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

RBC Quant EAFE  vs.  RBC PHN Short

RBC Quant EAFE

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Quant EAFE are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, RBC Quant may actually be approaching a critical reversion point that can send shares even higher in April 2025.

RBC PHN Short

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RBC PHN Short are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, RBC PHN is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with RBC Quant and RBC PHN

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

The idea behind RBC Quant EAFE and RBC PHN Short 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.