Correlation Between Mid Cap and Rbc China

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

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

Diversification Opportunities for Mid Cap and Rbc China

-0.38

Correlation Coefficient

Mid Cap  Rbc China

Very good diversification

The 3 months correlation between Mid and Rbc is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap Growth and Rbc China Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rbc China Equity and Mid Cap 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 Mid Cap Growth are associated (or correlated) with Rbc China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rbc China Equity has no effect on the direction of Mid Cap i.e., Mid Cap and Rbc China go up and down completely randomly.

Pair Corralation between Mid Cap and Rbc China

Assuming the 90 days horizon Mid Cap Growth is expected to under-perform the Rbc China. In addition to that, Mid Cap is 1.1 times more volatile than Rbc China Equity. It trades about -0.11 of its total potential returns per unit of risk. Rbc China Equity is currently generating about 0.16 per unit of volatility. If you would invest  868.00  in Rbc China Equity on December 17, 2024 and sell it today you would earn a total of  138.00  from holding Rbc China Equity or generate 15.9% return on investment over 90 days.

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

Mid Cap Growth  vs.  Rbc China Equity

Mid Cap Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mid Cap Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Rbc China Equity

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rbc China Equity are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Rbc China showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mid Cap and Rbc China

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

The idea behind Mid Cap Growth and Rbc China 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.

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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.