Correlation Between RBC Discount and Faraday Copper

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

By analyzing existing cross correlation between RBC Discount Bond and Faraday Copper Corp, you can compare the effects of market volatilities on RBC Discount and Faraday Copper 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 Discount with a short position of Faraday Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of RBC Discount and Faraday Copper.

Diversification Opportunities for RBC Discount and Faraday Copper

-0.72

Correlation Coefficient

RBC Discount  Faraday Copper

Pay attention - limited upside

The 3 months correlation between RBC and Faraday is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding RBC Discount Bond and Faraday Copper Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Faraday Copper Corp and RBC Discount 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 Discount Bond are associated (or correlated) with Faraday Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Faraday Copper Corp has no effect on the direction of RBC Discount i.e., RBC Discount and Faraday Copper go up and down completely randomly.

Pair Corralation between RBC Discount and Faraday Copper

Assuming the 90 days trading horizon RBC Discount is expected to generate 3.17 times less return on investment than Faraday Copper. But when comparing it to its historical volatility, RBC Discount Bond is 10.39 times less risky than Faraday Copper. It trades about 0.12 of its potential returns per unit of risk. Faraday Copper Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  62.00  in Faraday Copper Corp on October 5, 2024 and sell it today you would earn a total of  12.00  from holding Faraday Copper Corp or generate 19.35% return on investment over 90 days.

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

RBC Discount Bond  vs.  Faraday Copper Corp

RBC Discount Bond

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Discount Bond are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, RBC Discount is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Faraday Copper Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Faraday Copper Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with RBC Discount and Faraday Copper

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

The idea behind RBC Discount Bond and Faraday Copper Corp 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.