Correlation Between California Bond and Rbc Ultra-short

Can any of the company-specific risk be diversified away by investing in both California Bond and Rbc Ultra-short 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 California Bond and Rbc Ultra-short into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between California Bond Fund and Rbc Ultra Short Fixed, you can compare the effects of market volatilities on California Bond and Rbc Ultra-short 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 California Bond with a short position of Rbc Ultra-short. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Bond and Rbc Ultra-short.

Diversification Opportunities for California Bond and Rbc Ultra-short

-0.07

Correlation Coefficient

California Bond  Rbc Ultra-short

Good diversification

The 3 months correlation between California and RBC is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding California Bond Fund and Rbc Ultra Short Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rbc Ultra Short and California Bond 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 California Bond Fund are associated (or correlated) with Rbc Ultra-short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rbc Ultra Short has no effect on the direction of California Bond i.e., California Bond and Rbc Ultra-short go up and down completely randomly.

Pair Corralation between California Bond and Rbc Ultra-short

Assuming the 90 days horizon California Bond Fund is expected to generate 3.68 times more return on investment than Rbc Ultra-short. However, California Bond is 3.68 times more volatile than Rbc Ultra Short Fixed. It trades about 0.06 of its potential returns per unit of risk. Rbc Ultra Short Fixed is currently generating about 0.19 per unit of risk. If you would invest  1,040  in California Bond Fund on August 30, 2024 and sell it today you would earn a total of  11.00  from holding California Bond Fund or generate 1.06% return on investment over 90 days.

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

California Bond Fund  vs.  Rbc Ultra Short Fixed

California Bond

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in California Bond Fund are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, California Bond is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Rbc Ultra Short

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rbc Ultra Short Fixed are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Rbc Ultra-short is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with California Bond and Rbc Ultra-short

The main advantage of trading using opposite California Bond and Rbc Ultra-short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California Bond position performs unexpectedly, Rbc Ultra-short 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 Ultra-short will offset losses from the drop in Rbc Ultra-short's long position.

The idea behind California Bond Fund and Rbc Ultra Short Fixed 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.

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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.