Correlation Between Rbc Short and Gmo Resources

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

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

Diversification Opportunities for Rbc Short and Gmo Resources

-0.43

Correlation Coefficient

Rbc Short  Gmo Resources

Very good diversification

The 3 months correlation between Rbc and Gmo is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Rbc Short Duration and Gmo Resources Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Resources and Rbc Short 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 Short Duration are associated (or correlated) with Gmo Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo Resources has no effect on the direction of Rbc Short i.e., Rbc Short and Gmo Resources go up and down completely randomly.

Pair Corralation between Rbc Short and Gmo Resources

Assuming the 90 days horizon Rbc Short Duration is expected to generate 0.05 times more return on investment than Gmo Resources. However, Rbc Short Duration is 18.89 times less risky than Gmo Resources. It trades about -0.13 of its potential returns per unit of risk. Gmo Resources Fund is currently generating about -0.2 per unit of risk. If you would invest  976.00  in Rbc Short Duration on October 12, 2024 and sell it today you would lose (2.00) from holding Rbc Short Duration or give up 0.2% of portfolio value over 90 days.

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

Rbc Short Duration  vs.  Gmo Resources Fund

Rbc Short Duration

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rbc Short Duration are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Rbc Short is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Gmo Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gmo Resources Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward 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 Short and Gmo Resources

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

The idea behind Rbc Short Duration and Gmo Resources 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.