Correlation Between IShares Core and RBC Target

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

By analyzing existing cross correlation between iShares Core Canadian and RBC Target 2027, you can compare the effects of market volatilities on IShares Core and RBC Target 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 Core with a short position of RBC Target. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and RBC Target.

Diversification Opportunities for IShares Core and RBC Target

0.35

Correlation Coefficient

IShares Core  RBC Target

Weak diversification

The 3 months correlation between IShares and RBC is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core Canadian and RBC Target 2027 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Target 2027 and IShares Core 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 Core Canadian are associated (or correlated) with RBC Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBC Target 2027 has no effect on the direction of IShares Core i.e., IShares Core and RBC Target go up and down completely randomly.

Pair Corralation between IShares Core and RBC Target

Assuming the 90 days trading horizon iShares Core Canadian is expected to generate 4.87 times more return on investment than RBC Target. However, IShares Core is 4.87 times more volatile than RBC Target 2027. It trades about 0.04 of its potential returns per unit of risk. RBC Target 2027 is currently generating about 0.14 per unit of risk. If you would invest  1,965  in iShares Core Canadian on September 5, 2024 and sell it today you would earn a total of  29.00  from holding iShares Core Canadian or generate 1.48% return on investment over 90 days.

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

iShares Core Canadian  vs.  RBC Target 2027

iShares Core Canadian

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core Canadian are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental drivers, IShares Core is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

RBC Target 2027

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Target 2027 are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, RBC Target is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares Core and RBC Target

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

The idea behind iShares Core Canadian and RBC Target 2027 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.