Correlation Between RBC Quant and Desjardins

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

By analyzing existing cross correlation between RBC Quant Emerging and Desjardins RI Emerging, you can compare the effects of market volatilities on RBC Quant and Desjardins 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 Quant with a short position of Desjardins. Check out your portfolio center. Please also check ongoing floating volatility patterns of RBC Quant and Desjardins.

Diversification Opportunities for RBC Quant and Desjardins

0.89

Correlation Coefficient

RBC Quant  Desjardins

Very poor diversification

The 3 months correlation between RBC and Desjardins is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding RBC Quant Emerging and Desjardins RI Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Desjardins RI Emerging and RBC Quant 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 Quant Emerging are associated (or correlated) with Desjardins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Desjardins RI Emerging has no effect on the direction of RBC Quant i.e., RBC Quant and Desjardins go up and down completely randomly.

Pair Corralation between RBC Quant and Desjardins

Assuming the 90 days trading horizon RBC Quant Emerging is expected to generate 0.94 times more return on investment than Desjardins. However, RBC Quant Emerging is 1.06 times less risky than Desjardins. It trades about 0.07 of its potential returns per unit of risk. Desjardins RI Emerging is currently generating about 0.04 per unit of risk. If you would invest  2,176  in RBC Quant Emerging on December 30, 2024 and sell it today you would earn a total of  75.00  from holding RBC Quant Emerging or generate 3.45% return on investment over 90 days.

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

RBC Quant Emerging  vs.  Desjardins RI Emerging

RBC Quant Emerging

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Quant Emerging are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, RBC Quant is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Desjardins RI Emerging

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Desjardins RI Emerging are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Desjardins is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with RBC Quant and Desjardins

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

The idea behind RBC Quant Emerging and Desjardins RI Emerging 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.