Correlation Between Rbc Microcap and Federated Mdt

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

Diversification Opportunities for Rbc Microcap and Federated Mdt

0.78

Correlation Coefficient

Rbc Microcap  Federated Mdt

Poor diversification

The 3 months correlation between Rbc and Federated is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Rbc Microcap Value and Federated Mdt Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Mdt Balanced 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 Federated Mdt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Mdt Balanced has no effect on the direction of Rbc Microcap i.e., Rbc Microcap and Federated Mdt go up and down completely randomly.

Pair Corralation between Rbc Microcap and Federated Mdt

Assuming the 90 days horizon Rbc Microcap Value is expected to generate 0.4 times more return on investment than Federated Mdt. However, Rbc Microcap Value is 2.49 times less risky than Federated Mdt. It trades about 0.12 of its potential returns per unit of risk. Federated Mdt Balanced is currently generating about -0.16 per unit of risk. If you would invest  3,047  in Rbc Microcap Value on September 15, 2024 and sell it today you would earn a total of  59.00  from holding Rbc Microcap Value or generate 1.94% return on investment over 90 days.

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

Rbc Microcap Value  vs.  Federated Mdt Balanced

Rbc Microcap Value

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rbc Microcap Value are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Rbc Microcap may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Federated Mdt Balanced

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Federated Mdt Balanced has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Federated Mdt 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 Microcap and Federated Mdt

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

The idea behind Rbc Microcap Value and Federated Mdt Balanced 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.