Correlation Between RBC Target and Vanguard Canadian

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

By analyzing existing cross correlation between RBC Target 2026 and Vanguard Canadian Corporate, you can compare the effects of market volatilities on RBC Target and Vanguard Canadian 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 Target with a short position of Vanguard Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of RBC Target and Vanguard Canadian.

Diversification Opportunities for RBC Target and Vanguard Canadian

0.73

Correlation Coefficient

RBC Target  Vanguard Canadian

Poor diversification

The 3 months correlation between RBC and Vanguard is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding RBC Target 2026 and Vanguard Canadian Corporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Canadian and RBC Target 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 Target 2026 are associated (or correlated) with Vanguard Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Canadian has no effect on the direction of RBC Target i.e., RBC Target and Vanguard Canadian go up and down completely randomly.

Pair Corralation between RBC Target and Vanguard Canadian

Assuming the 90 days trading horizon RBC Target is expected to generate 1.5 times less return on investment than Vanguard Canadian. But when comparing it to its historical volatility, RBC Target 2026 is 2.77 times less risky than Vanguard Canadian. It trades about 0.21 of its potential returns per unit of risk. Vanguard Canadian Corporate is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,380  in Vanguard Canadian Corporate on September 5, 2024 and sell it today you would earn a total of  47.00  from holding Vanguard Canadian Corporate or generate 1.97% return on investment over 90 days.

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

RBC Target 2026  vs.  Vanguard Canadian Corporate

RBC Target 2026

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Target 2026 are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, RBC Target is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Vanguard Canadian

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Canadian Corporate are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental drivers, Vanguard Canadian is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with RBC Target and Vanguard Canadian

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

The idea behind RBC Target 2026 and Vanguard Canadian Corporate 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.