Correlation Between Edgepoint Canadian and RBC Select

Can any of the company-specific risk be diversified away by investing in both Edgepoint 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 Edgepoint 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 Edgepoint Canadian Portfolio and RBC Select Balanced, you can compare the effects of market volatilities on Edgepoint 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 Edgepoint Canadian with a short position of RBC Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Edgepoint Canadian and RBC Select.

Diversification Opportunities for Edgepoint Canadian and RBC Select

0.94

Correlation Coefficient

Edgepoint Canadian  RBC Select

Almost no diversification

The 3 months correlation between Edgepoint and RBC is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Edgepoint Canadian Portfolio 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 Edgepoint 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 Edgepoint Canadian Portfolio 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 Edgepoint Canadian i.e., Edgepoint Canadian and RBC Select go up and down completely randomly.

Pair Corralation between Edgepoint Canadian and RBC Select

Assuming the 90 days trading horizon Edgepoint Canadian Portfolio is expected to generate 1.68 times more return on investment than RBC Select. However, Edgepoint Canadian is 1.68 times more volatile than RBC Select Balanced. It trades about 0.3 of its potential returns per unit of risk. RBC Select Balanced is currently generating about 0.26 per unit of risk. If you would invest  5,347  in Edgepoint Canadian Portfolio on September 13, 2024 and sell it today you would earn a total of  560.00  from holding Edgepoint Canadian Portfolio or generate 10.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.41%
Values	Daily Returns

Edgepoint Canadian Portfolio  vs.  RBC Select Balanced

Edgepoint Canadian

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Edgepoint Canadian Portfolio are ranked lower than 23 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat weak technical and fundamental indicators, Edgepoint Canadian may actually be approaching a critical reversion point that can send shares even higher in January 2025.

RBC Select Balanced

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Select Balanced are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. 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 Edgepoint Canadian and RBC Select

The main advantage of trading using opposite Edgepoint Canadian and RBC Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Edgepoint 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 Edgepoint Canadian Portfolio 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.