Correlation Between IShares Floating and RBC Quant

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

By analyzing existing cross correlation between iShares Floating Rate and RBC Quant European, you can compare the effects of market volatilities on IShares Floating and RBC Quant 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 IShares Floating with a short position of RBC Quant. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Floating and RBC Quant.

Diversification Opportunities for IShares Floating and RBC Quant

0.83

Correlation Coefficient

IShares Floating  RBC Quant

Very poor diversification

The 3 months correlation between IShares and RBC is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding iShares Floating Rate and RBC Quant European in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Quant European and IShares Floating 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 iShares Floating Rate are associated (or correlated) with RBC Quant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBC Quant European has no effect on the direction of IShares Floating i.e., IShares Floating and RBC Quant go up and down completely randomly.

Pair Corralation between IShares Floating and RBC Quant

Assuming the 90 days trading horizon IShares Floating is expected to generate 10.1 times less return on investment than RBC Quant. But when comparing it to its historical volatility, iShares Floating Rate is 13.38 times less risky than RBC Quant. It trades about 0.27 of its potential returns per unit of risk. RBC Quant European is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  2,524  in RBC Quant European on December 2, 2024 and sell it today you would earn a total of  237.00  from holding RBC Quant European or generate 9.39% return on investment over 90 days.

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

iShares Floating Rate  vs.  RBC Quant European

iShares Floating Rate

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Floating Rate are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, IShares Floating is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

RBC Quant European

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Quant European are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, RBC Quant may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with IShares Floating and RBC Quant

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

The idea behind iShares Floating Rate and RBC Quant European 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.

Check out your portfolio center.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.