Correlation Between Rbc Emerging and Financial Industries

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

By analyzing existing cross correlation between Rbc Emerging Markets and Financial Industries Fund, you can compare the effects of market volatilities on Rbc Emerging and Financial Industries 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 Emerging with a short position of Financial Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rbc Emerging and Financial Industries.

Diversification Opportunities for Rbc Emerging and Financial Industries

-0.21

Correlation Coefficient

Rbc Emerging  Financial Industries

Very good diversification

The 3 months correlation between Rbc and Financial is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Rbc Emerging Markets and Financial Industries Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial Industries and Rbc Emerging 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 Emerging Markets are associated (or correlated) with Financial Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial Industries has no effect on the direction of Rbc Emerging i.e., Rbc Emerging and Financial Industries go up and down completely randomly.

Pair Corralation between Rbc Emerging and Financial Industries

Assuming the 90 days horizon Rbc Emerging Markets is expected to generate 0.47 times more return on investment than Financial Industries. However, Rbc Emerging Markets is 2.11 times less risky than Financial Industries. It trades about -0.23 of its potential returns per unit of risk. Financial Industries Fund is currently generating about -0.18 per unit of risk. If you would invest  1,413  in Rbc Emerging Markets on October 9, 2024 and sell it today you would lose (92.00) from holding Rbc Emerging Markets or give up 6.51% of portfolio value over 90 days.

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

Rbc Emerging Markets  vs.  Financial Industries Fund

Rbc Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rbc Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Financial Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Financial Industries Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Financial Industries 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 Emerging and Financial Industries

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

The idea behind Rbc Emerging Markets and Financial Industries Fund 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.