Correlation Between RBC Discount and Topaz Energy

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

Diversification Opportunities for RBC Discount and Topaz Energy

-0.68

Correlation Coefficient

RBC Discount  Topaz Energy

Excellent diversification

The 3 months correlation between RBC and Topaz is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding RBC Discount Bond and Topaz Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Topaz Energy 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 Topaz Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Topaz Energy Corp has no effect on the direction of RBC Discount i.e., RBC Discount and Topaz Energy go up and down completely randomly.

Pair Corralation between RBC Discount and Topaz Energy

Assuming the 90 days trading horizon RBC Discount Bond is expected to generate 0.36 times more return on investment than Topaz Energy. However, RBC Discount Bond is 2.77 times less risky than Topaz Energy. It trades about 0.03 of its potential returns per unit of risk. Topaz Energy Corp is currently generating about -0.15 per unit of risk. If you would invest  2,194  in RBC Discount Bond on December 28, 2024 and sell it today you would earn a total of  18.00  from holding RBC Discount Bond or generate 0.82% 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.  Topaz Energy Corp

RBC Discount Bond

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Discount Bond are ranked lower than 2 (%) 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.

Topaz Energy Corp

Risk-Adjusted Performance

Very Weak

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

Pair Trading with RBC Discount and Topaz Energy

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

The idea behind RBC Discount Bond and Topaz Energy 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.

Check out your portfolio center.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.