Correlation Between RBC Discount and Financial

Can any of the company-specific risk be diversified away by investing in both RBC Discount and Financial 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 Financial 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 Financial 15 Split, you can compare the effects of market volatilities on RBC Discount and Financial 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 Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of RBC Discount and Financial.

Diversification Opportunities for RBC Discount and Financial

0.88

Correlation Coefficient

RBC Discount  Financial

Very poor diversification

The 3 months correlation between RBC and Financial is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding RBC Discount Bond and Financial 15 Split in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial 15 Split 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 Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial 15 Split has no effect on the direction of RBC Discount i.e., RBC Discount and Financial go up and down completely randomly.

Pair Corralation between RBC Discount and Financial

Assuming the 90 days trading horizon RBC Discount is expected to generate 1.97 times less return on investment than Financial. In addition to that, RBC Discount is 1.16 times more volatile than Financial 15 Split. It trades about 0.11 of its total potential returns per unit of risk. Financial 15 Split is currently generating about 0.25 per unit of volatility. If you would invest  852.00  in Financial 15 Split on October 4, 2024 and sell it today you would earn a total of  217.00  from holding Financial 15 Split or generate 25.47% return on investment over 90 days.

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

RBC Discount Bond  vs.  Financial 15 Split

RBC Discount Bond

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Discount Bond are ranked lower than 17 (%) 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.

Financial 15 Split

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Financial 15 Split are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Financial 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 Discount and Financial

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

The idea behind RBC Discount Bond and Financial 15 Split 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.