Correlation Between Royal Bank and Canadian Life
Can any of the company-specific risk be diversified away by investing in both Royal Bank and Canadian Life 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 Royal Bank and Canadian Life into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Royal Bank of and Canadian Life Companies, you can compare the effects of market volatilities on Royal Bank and Canadian Life 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 Royal Bank with a short position of Canadian Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Bank and Canadian Life.
Diversification Opportunities for Royal Bank and Canadian Life
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Royal and Canadian is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Royal Bank of and Canadian Life Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Life Companies and Royal Bank 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 Royal Bank of are associated (or correlated) with Canadian Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Life Companies has no effect on the direction of Royal Bank i.e., Royal Bank and Canadian Life go up and down completely randomly.
Pair Corralation between Royal Bank and Canadian Life
Assuming the 90 days trading horizon Royal Bank is expected to generate 1.76 times less return on investment than Canadian Life. In addition to that, Royal Bank is 1.38 times more volatile than Canadian Life Companies. It trades about 0.09 of its total potential returns per unit of risk. Canadian Life Companies is currently generating about 0.22 per unit of volatility. If you would invest 1,023 in Canadian Life Companies on September 25, 2024 and sell it today you would earn a total of 48.00 from holding Canadian Life Companies or generate 4.69% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Royal Bank of vs. Canadian Life Companies
Performance |
Timeline |
Royal Bank |
Canadian Life Companies |
Royal Bank and Canadian Life Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Royal Bank and Canadian Life
The main advantage of trading using opposite Royal Bank and Canadian Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royal Bank position performs unexpectedly, Canadian Life 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 Canadian Life will offset losses from the drop in Canadian Life's long position.Royal Bank vs. Canso Credit Trust | Royal Bank vs. Arbor Metals Corp | Royal Bank vs. VersaBank | Royal Bank vs. North American Financial |
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Check out your portfolio center.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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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