Correlation Between Rbc Microcap and Smallcap Growth

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

Diversification Opportunities for Rbc Microcap and Smallcap Growth

0.9

Correlation Coefficient

Rbc Microcap  Smallcap Growth

Almost no diversification

The 3 months correlation between Rbc and Smallcap is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Rbc Microcap Value and Smallcap Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smallcap Growth 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 Smallcap Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smallcap Growth has no effect on the direction of Rbc Microcap i.e., Rbc Microcap and Smallcap Growth go up and down completely randomly.

Pair Corralation between Rbc Microcap and Smallcap Growth

Assuming the 90 days horizon Rbc Microcap Value is expected to generate 0.83 times more return on investment than Smallcap Growth. However, Rbc Microcap Value is 1.2 times less risky than Smallcap Growth. It trades about -0.1 of its potential returns per unit of risk. Smallcap Growth Fund is currently generating about -0.1 per unit of risk. If you would invest  2,679  in Rbc Microcap Value on December 21, 2024 and sell it today you would lose (179.00) from holding Rbc Microcap Value or give up 6.68% of portfolio value over 90 days.

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

Rbc Microcap Value  vs.  Smallcap Growth Fund

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.

Smallcap Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Smallcap Growth Fund 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.

Pair Trading with Rbc Microcap and Smallcap Growth

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

The idea behind Rbc Microcap Value and Smallcap Growth Fund 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.