Correlation Between RBC Short and Mackenzie Investment

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

By analyzing existing cross correlation between RBC Short Term and Mackenzie Investment Grade, you can compare the effects of market volatilities on RBC Short and Mackenzie Investment 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 Short with a short position of Mackenzie Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of RBC Short and Mackenzie Investment.

Diversification Opportunities for RBC Short and Mackenzie Investment

-0.7

Correlation Coefficient

RBC Short  Mackenzie Investment

Excellent diversification

The 3 months correlation between RBC and Mackenzie is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding RBC Short Term and Mackenzie Investment Grade in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mackenzie Investment and RBC Short 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 Short Term are associated (or correlated) with Mackenzie Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mackenzie Investment has no effect on the direction of RBC Short i.e., RBC Short and Mackenzie Investment go up and down completely randomly.

Pair Corralation between RBC Short and Mackenzie Investment

Assuming the 90 days trading horizon RBC Short Term is expected to generate 0.6 times more return on investment than Mackenzie Investment. However, RBC Short Term is 1.67 times less risky than Mackenzie Investment. It trades about 0.22 of its potential returns per unit of risk. Mackenzie Investment Grade is currently generating about 0.1 per unit of risk. If you would invest  2,138  in RBC Short Term on September 5, 2024 and sell it today you would earn a total of  32.00  from holding RBC Short Term or generate 1.5% return on investment over 90 days.

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

RBC Short Term  vs.  Mackenzie Investment Grade

RBC Short Term

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Short Term are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, RBC Short is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Mackenzie Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mackenzie Investment Grade has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Mackenzie Investment 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 Short and Mackenzie Investment

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

The idea behind RBC Short Term and Mackenzie Investment Grade 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.