Correlation Between Rbc Small and Provident Trust

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

By analyzing existing cross correlation between Rbc Small Cap and Provident Trust Strategy, you can compare the effects of market volatilities on Rbc Small and Provident Trust 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 Small with a short position of Provident Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rbc Small and Provident Trust.

Diversification Opportunities for Rbc Small and Provident Trust

0.79

Correlation Coefficient

Rbc Small  Provident Trust

Poor diversification

The 3 months correlation between Rbc and Provident is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Rbc Small Cap and Provident Trust Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Provident Trust Strategy and Rbc Small 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 Small Cap are associated (or correlated) with Provident Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Provident Trust Strategy has no effect on the direction of Rbc Small i.e., Rbc Small and Provident Trust go up and down completely randomly.

Pair Corralation between Rbc Small and Provident Trust

Assuming the 90 days horizon Rbc Small Cap is expected to under-perform the Provident Trust. In addition to that, Rbc Small is 2.88 times more volatile than Provident Trust Strategy. It trades about -0.28 of its total potential returns per unit of risk. Provident Trust Strategy is currently generating about -0.37 per unit of volatility. If you would invest  2,159  in Provident Trust Strategy on October 13, 2024 and sell it today you would lose (207.00) from holding Provident Trust Strategy or give up 9.59% of portfolio value over 90 days.

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

Rbc Small Cap  vs.  Provident Trust Strategy

Rbc Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rbc Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Provident Trust Strategy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Provident Trust Strategy has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Provident Trust is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Rbc Small and Provident Trust

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

The idea behind Rbc Small Cap and Provident Trust Strategy 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.