Correlation Between Rbc Small and Rbc Smid

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

Diversification Opportunities for Rbc Small and Rbc Smid

0.76

Correlation Coefficient

Rbc Small  Rbc Smid

Poor diversification

The 3 months correlation between Rbc and Rbc is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Rbc Small Cap and Rbc Smid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rbc Smid Cap 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 Rbc Smid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rbc Smid Cap has no effect on the direction of Rbc Small i.e., Rbc Small and Rbc Smid go up and down completely randomly.

Pair Corralation between Rbc Small and Rbc Smid

Assuming the 90 days horizon Rbc Small Cap is expected to under-perform the Rbc Smid. In addition to that, Rbc Small is 4.42 times more volatile than Rbc Smid Cap. It trades about -0.29 of its total potential returns per unit of risk. Rbc Smid Cap is currently generating about -0.31 per unit of volatility. If you would invest  1,361  in Rbc Smid Cap on September 29, 2024 and sell it today you would lose (77.00) from holding Rbc Smid Cap or give up 5.66% 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.  Rbc Smid Cap

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 January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Rbc Smid Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rbc Smid Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Rbc Smid 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 Rbc Smid

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

The idea behind Rbc Small Cap and Rbc Smid Cap 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.