Correlation Between Utilities Portfolio and City National

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

By analyzing existing cross correlation between Utilities Portfolio Utilities and City National Rochdale, you can compare the effects of market volatilities on Utilities Portfolio and City National 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 Utilities Portfolio with a short position of City National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Utilities Portfolio and City National.

Diversification Opportunities for Utilities Portfolio and City National

0.75

Correlation Coefficient

Utilities Portfolio  City National

Poor diversification

The 3 months correlation between Utilities and City is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Utilities Portfolio Utilities and City National Rochdale in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on City National Rochdale and Utilities Portfolio 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 Utilities Portfolio Utilities are associated (or correlated) with City National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of City National Rochdale has no effect on the direction of Utilities Portfolio i.e., Utilities Portfolio and City National go up and down completely randomly.

Pair Corralation between Utilities Portfolio and City National

Assuming the 90 days horizon Utilities Portfolio is expected to generate 1.03 times less return on investment than City National. In addition to that, Utilities Portfolio is 1.7 times more volatile than City National Rochdale. It trades about 0.09 of its total potential returns per unit of risk. City National Rochdale is currently generating about 0.15 per unit of volatility. If you would invest  2,755  in City National Rochdale on September 12, 2024 and sell it today you would earn a total of  184.00  from holding City National Rochdale or generate 6.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Utilities Portfolio Utilities  vs.  City National Rochdale

Utilities Portfolio

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Utilities Portfolio Utilities are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Utilities Portfolio may actually be approaching a critical reversion point that can send shares even higher in January 2025.

City National Rochdale

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in City National Rochdale are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, City National may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Utilities Portfolio and City National

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

The idea behind Utilities Portfolio Utilities and City National Rochdale 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.