Correlation Between PHN Multi and RBC Life

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

By analyzing existing cross correlation between PHN Multi Style All Cap and RBC Life Science, you can compare the effects of market volatilities on PHN Multi and RBC Life 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 PHN Multi with a short position of RBC Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of PHN Multi and RBC Life.

Diversification Opportunities for PHN Multi and RBC Life

0.77

Correlation Coefficient

PHN Multi  RBC Life

Poor diversification

The 3 months correlation between PHN and RBC is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding PHN Multi Style All Cap and RBC Life Science in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Life Science and PHN Multi 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 PHN Multi Style All Cap are associated (or correlated) with RBC Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBC Life Science has no effect on the direction of PHN Multi i.e., PHN Multi and RBC Life go up and down completely randomly.

Pair Corralation between PHN Multi and RBC Life

Assuming the 90 days trading horizon PHN Multi Style All Cap is expected to under-perform the RBC Life. In addition to that, PHN Multi is 1.59 times more volatile than RBC Life Science. It trades about -0.01 of its total potential returns per unit of risk. RBC Life Science is currently generating about 0.19 per unit of volatility. If you would invest  6,771  in RBC Life Science on September 25, 2024 and sell it today you would earn a total of  813.00  from holding RBC Life Science or generate 12.01% return on investment over 90 days.

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

PHN Multi Style All Cap  vs.  RBC Life Science

PHN Multi Style

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PHN Multi Style All Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of very healthy basic indicators, PHN Multi is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

RBC Life Science

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Life Science are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat weak technical and fundamental indicators, RBC Life may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with PHN Multi and RBC Life

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

The idea behind PHN Multi Style All Cap and RBC Life Science 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.