Correlation Between Rbc Microcap and Biotechnology Fund

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

Diversification Opportunities for Rbc Microcap and Biotechnology Fund

0.93

Correlation Coefficient

Rbc Microcap  Biotechnology Fund

Almost no diversification

The 3 months correlation between Rbc and Biotechnology is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Rbc Microcap Value and Biotechnology Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biotechnology Fund Class 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 Biotechnology Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biotechnology Fund Class has no effect on the direction of Rbc Microcap i.e., Rbc Microcap and Biotechnology Fund go up and down completely randomly.

Pair Corralation between Rbc Microcap and Biotechnology Fund

Assuming the 90 days horizon Rbc Microcap Value is expected to under-perform the Biotechnology Fund. In addition to that, Rbc Microcap is 1.03 times more volatile than Biotechnology Fund Class. It trades about -0.16 of its total potential returns per unit of risk. Biotechnology Fund Class is currently generating about -0.07 per unit of volatility. If you would invest  5,412  in Biotechnology Fund Class on December 5, 2024 and sell it today you would lose (95.00) from holding Biotechnology Fund Class or give up 1.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.45%
Values	Daily Returns

Rbc Microcap Value  vs.  Biotechnology Fund Class

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 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.

Biotechnology Fund Class

Risk-Adjusted Performance

Very Weak

Over the last 90 days Biotechnology Fund Class 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 Biotechnology Fund

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

The idea behind Rbc Microcap Value and Biotechnology Fund Class 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.