Correlation Between Rbc Microcap and Fabxx

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

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

Diversification Opportunities for Rbc Microcap and Fabxx

0.05

Correlation Coefficient

Rbc Microcap  Fabxx

Significant diversification

The 3 months correlation between Rbc and Fabxx is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Rbc Microcap Value and Fabxx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fabxx and Rbc Microcap 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 Microcap Value are associated (or correlated) with Fabxx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fabxx has no effect on the direction of Rbc Microcap i.e., Rbc Microcap and Fabxx go up and down completely randomly.

Pair Corralation between Rbc Microcap and Fabxx

Assuming the 90 days horizon Rbc Microcap Value is expected to generate 0.08 times more return on investment than Fabxx. However, Rbc Microcap Value is 12.27 times less risky than Fabxx. It trades about -0.1 of its potential returns per unit of risk. Fabxx is currently generating about -0.03 per unit of risk. If you would invest  2,691  in Rbc Microcap Value on December 27, 2024 and sell it today you would lose (179.00) from holding Rbc Microcap Value or give up 6.65% of portfolio value over 90 days.

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

Rbc Microcap Value  vs.  Fabxx

Rbc Microcap Value

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rbc Microcap Value 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.

Fabxx

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fabxx 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 April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Rbc Microcap and Fabxx

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

The idea behind Rbc Microcap Value and Fabxx 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.