Correlation Between Rbc Ultra-short and Franklin California

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

By analyzing existing cross correlation between Rbc Ultra Short Fixed and Franklin California High, you can compare the effects of market volatilities on Rbc Ultra-short and Franklin California 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 Ultra-short with a short position of Franklin California. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rbc Ultra-short and Franklin California.

Diversification Opportunities for Rbc Ultra-short and Franklin California

0.42

Correlation Coefficient

Rbc Ultra-short  Franklin California

Very weak diversification

The 3 months correlation between Rbc and Franklin is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Rbc Ultra Short Fixed and Franklin California High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin California High and Rbc Ultra-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 Ultra Short Fixed are associated (or correlated) with Franklin California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin California High has no effect on the direction of Rbc Ultra-short i.e., Rbc Ultra-short and Franklin California go up and down completely randomly.

Pair Corralation between Rbc Ultra-short and Franklin California

Assuming the 90 days horizon Rbc Ultra Short Fixed is expected to generate 0.45 times more return on investment than Franklin California. However, Rbc Ultra Short Fixed is 2.22 times less risky than Franklin California. It trades about 0.22 of its potential returns per unit of risk. Franklin California High is currently generating about 0.03 per unit of risk. If you would invest  994.00  in Rbc Ultra Short Fixed on December 20, 2024 and sell it today you would earn a total of  13.00  from holding Rbc Ultra Short Fixed or generate 1.31% return on investment over 90 days.

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

Rbc Ultra Short Fixed  vs.  Franklin California High

Rbc Ultra Short

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Rbc Ultra Short Fixed are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Rbc Ultra-short is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Franklin California High

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin California High are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Franklin California 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 Ultra-short and Franklin California

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

The idea behind Rbc Ultra Short Fixed and Franklin California High 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.