Correlation Between Royal Bank and Pacific Imperial

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

Diversification Opportunities for Royal Bank and Pacific Imperial

-0.49

Correlation Coefficient

Royal Bank  Pacific Imperial

Very good diversification

The 3 months correlation between Royal and Pacific is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Royal Bank of and Pacific Imperial Mines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific Imperial Mines 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 Pacific Imperial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacific Imperial Mines has no effect on the direction of Royal Bank i.e., Royal Bank and Pacific Imperial go up and down completely randomly.

Pair Corralation between Royal Bank and Pacific Imperial

Assuming the 90 days trading horizon Royal Bank is expected to generate 174.21 times less return on investment than Pacific Imperial. But when comparing it to its historical volatility, Royal Bank of is 69.32 times less risky than Pacific Imperial. It trades about 0.03 of its potential returns per unit of risk. Pacific Imperial Mines is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  0.50  in Pacific Imperial Mines on December 2, 2024 and sell it today you would earn a total of  0.00  from holding Pacific Imperial Mines or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.62%
Values	Daily Returns

Royal Bank of  vs.  Pacific Imperial Mines

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 4 (%) 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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Pacific Imperial Mines

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pacific Imperial Mines has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Pacific Imperial is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Royal Bank and Pacific Imperial

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

The idea behind Royal Bank of and Pacific Imperial Mines 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.