Correlation Between Sustainable Innovation and RBC Canadian

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

By analyzing existing cross correlation between Sustainable Innovation Health and RBC Canadian Equity, you can compare the effects of market volatilities on Sustainable Innovation and RBC Canadian 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 Sustainable Innovation with a short position of RBC Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sustainable Innovation and RBC Canadian.

Diversification Opportunities for Sustainable Innovation and RBC Canadian

-0.06

Correlation Coefficient

Sustainable Innovation  RBC Canadian

Good diversification

The 3 months correlation between Sustainable and RBC is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Sustainable Innovation Health and RBC Canadian Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Canadian Equity and Sustainable Innovation 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 Sustainable Innovation Health are associated (or correlated) with RBC Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBC Canadian Equity has no effect on the direction of Sustainable Innovation i.e., Sustainable Innovation and RBC Canadian go up and down completely randomly.

Pair Corralation between Sustainable Innovation and RBC Canadian

Assuming the 90 days trading horizon Sustainable Innovation Health is expected to generate 0.75 times more return on investment than RBC Canadian. However, Sustainable Innovation Health is 1.33 times less risky than RBC Canadian. It trades about 0.12 of its potential returns per unit of risk. RBC Canadian Equity is currently generating about -0.27 per unit of risk. If you would invest  1,344  in Sustainable Innovation Health on October 7, 2024 and sell it today you would earn a total of  14.00  from holding Sustainable Innovation Health or generate 1.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

Sustainable Innovation Health  vs.  RBC Canadian Equity

Sustainable Innovation

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sustainable Innovation Health are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat unfluctuating technical indicators, Sustainable Innovation may actually be approaching a critical reversion point that can send shares even higher in February 2025.

RBC Canadian Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RBC Canadian Equity has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong basic indicators, RBC Canadian is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sustainable Innovation and RBC Canadian

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

The idea behind Sustainable Innovation Health and RBC Canadian Equity 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.