Correlation Between RBC Discount and Guardian

Can any of the company-specific risk be diversified away by investing in both RBC Discount and Guardian 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 Guardian 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 Guardian i3 Global, you can compare the effects of market volatilities on RBC Discount and Guardian 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 Guardian. Check out your portfolio center. Please also check ongoing floating volatility patterns of RBC Discount and Guardian.

Diversification Opportunities for RBC Discount and Guardian

-0.34

Correlation Coefficient

RBC Discount  Guardian

Very good diversification

The 3 months correlation between RBC and Guardian is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding RBC Discount Bond and Guardian i3 Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guardian i3 Global 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 Guardian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guardian i3 Global has no effect on the direction of RBC Discount i.e., RBC Discount and Guardian go up and down completely randomly.

Pair Corralation between RBC Discount and Guardian

Assuming the 90 days trading horizon RBC Discount Bond is expected to generate 0.37 times more return on investment than Guardian. However, RBC Discount Bond is 2.72 times less risky than Guardian. It trades about 0.12 of its potential returns per unit of risk. Guardian i3 Global is currently generating about 0.01 per unit of risk. If you would invest  2,093  in RBC Discount Bond on December 10, 2024 and sell it today you would earn a total of  129.00  from holding RBC Discount Bond or generate 6.16% return on investment over 90 days.

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

RBC Discount Bond  vs.  Guardian i3 Global

RBC Discount Bond

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Discount Bond are ranked lower than 7 (%) 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.

Guardian i3 Global

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guardian i3 Global has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Pair Trading with RBC Discount and Guardian

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

The idea behind RBC Discount Bond and Guardian i3 Global 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.