Correlation Between Royal Bank and Canadian General

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

By analyzing existing cross correlation between Royal Bank of and Canadian General Investments, you can compare the effects of market volatilities on Royal Bank and Canadian General 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 Royal Bank with a short position of Canadian General. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Bank and Canadian General.

Diversification Opportunities for Royal Bank and Canadian General

-0.63

Correlation Coefficient

Royal Bank  Canadian General

Excellent diversification

The 3 months correlation between Royal and Canadian is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Royal Bank of and Canadian General Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian General Inv and Royal Bank 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 Royal Bank of are associated (or correlated) with Canadian General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian General Inv has no effect on the direction of Royal Bank i.e., Royal Bank and Canadian General go up and down completely randomly.

Pair Corralation between Royal Bank and Canadian General

Assuming the 90 days trading horizon Royal Bank of is expected to generate 0.16 times more return on investment than Canadian General. However, Royal Bank of is 6.33 times less risky than Canadian General. It trades about 0.04 of its potential returns per unit of risk. Canadian General Investments is currently generating about -0.12 per unit of risk. If you would invest  2,468  in Royal Bank of on December 31, 2024 and sell it today you would earn a total of  14.00  from holding Royal Bank of or generate 0.57% return on investment over 90 days.

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

Royal Bank of  vs.  Canadian General Investments

Royal Bank

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Royal Bank of are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Royal Bank is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Canadian General Inv

Risk-Adjusted Performance

Very Weak

Over the last 90 days Canadian General Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's forward 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 Royal Bank and Canadian General

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

The idea behind Royal Bank of and Canadian General Investments 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .