Correlation Between Royal Bank and Enbridge H

Can any of the company-specific risk be diversified away by investing in both Royal Bank and Enbridge H 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 Enbridge H 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 Enbridge H Cum, you can compare the effects of market volatilities on Royal Bank and Enbridge H 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 Enbridge H. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Bank and Enbridge H.

Diversification Opportunities for Royal Bank and Enbridge H

0.92

Correlation Coefficient

Royal Bank  Enbridge H

Almost no diversification

The 3 months correlation between Royal and Enbridge is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Royal Bank of and Enbridge H Cum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enbridge H Cum 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 Enbridge H. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enbridge H Cum has no effect on the direction of Royal Bank i.e., Royal Bank and Enbridge H go up and down completely randomly.

Pair Corralation between Royal Bank and Enbridge H

Assuming the 90 days trading horizon Royal Bank is expected to generate 18.47 times less return on investment than Enbridge H. But when comparing it to its historical volatility, Royal Bank of is 1.24 times less risky than Enbridge H. It trades about 0.04 of its potential returns per unit of risk. Enbridge H Cum is currently generating about 0.62 of returns per unit of risk over similar time horizon. If you would invest  2,032  in Enbridge H Cum on October 25, 2024 and sell it today you would earn a total of  113.00  from holding Enbridge H Cum or generate 5.56% return on investment over 90 days.

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

Royal Bank of  vs.  Enbridge H Cum

Royal Bank

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Royal Bank of are ranked lower than 8 (%) 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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Enbridge H Cum

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge H Cum are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal fundamental drivers, Enbridge H may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Royal Bank and Enbridge H

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

The idea behind Royal Bank of and Enbridge H Cum 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.