Correlation Between PIMCO Canadian and RBC Select

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

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

Diversification Opportunities for PIMCO Canadian and RBC Select

0.61

Correlation Coefficient

PIMCO Canadian  RBC Select

Poor diversification

The 3 months correlation between PIMCO and RBC is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO Canadian Core and RBC Select Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Select Balanced and PIMCO 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 PIMCO Canadian Core are associated (or correlated) with RBC Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBC Select Balanced has no effect on the direction of PIMCO Canadian i.e., PIMCO Canadian and RBC Select go up and down completely randomly.

Pair Corralation between PIMCO Canadian and RBC Select

Assuming the 90 days trading horizon PIMCO Canadian is expected to generate 7.59 times less return on investment than RBC Select. But when comparing it to its historical volatility, PIMCO Canadian Core is 1.28 times less risky than RBC Select. It trades about 0.01 of its potential returns per unit of risk. RBC Select Balanced is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,876  in RBC Select Balanced on September 26, 2024 and sell it today you would earn a total of  503.00  from holding RBC Select Balanced or generate 17.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	18.31%
Values	Daily Returns

PIMCO Canadian Core  vs.  RBC Select Balanced

PIMCO Canadian Core

Risk-Adjusted Performance

0 of 100

Very Weak

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

RBC Select Balanced

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RBC Select Balanced has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong basic indicators, RBC Select is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with PIMCO Canadian and RBC Select

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

The idea behind PIMCO Canadian Core and RBC Select Balanced 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.