Correlation Between RBC Canadian and RBC Dividend

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

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

Diversification Opportunities for RBC Canadian and RBC Dividend

0.93

Correlation Coefficient

RBC Canadian  RBC Dividend

Almost no diversification

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

Pair Corralation between RBC Canadian and RBC Dividend

Assuming the 90 days trading horizon RBC Canadian Equity is expected to generate 0.81 times more return on investment than RBC Dividend. However, RBC Canadian Equity is 1.24 times less risky than RBC Dividend. It trades about 0.34 of its potential returns per unit of risk. RBC Dividend Cur is currently generating about 0.15 per unit of risk. If you would invest  2,887  in RBC Canadian Equity on September 4, 2024 and sell it today you would earn a total of  316.00  from holding RBC Canadian Equity or generate 10.95% return on investment over 90 days.

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

RBC Canadian Equity  vs.  RBC Dividend Cur

RBC Canadian Equity

Risk-Adjusted Performance

26 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Canadian Equity are ranked lower than 26 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat weak basic indicators, RBC Canadian may actually be approaching a critical reversion point that can send shares even higher in January 2025.

RBC Dividend Cur

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Dividend Cur are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong basic indicators, RBC Dividend 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 Canadian and RBC Dividend

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

The idea behind RBC Canadian Equity and RBC Dividend Cur 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.