Correlation Between IShares Fundamental and RBC Discount
Can any of the company-specific risk be diversified away by investing in both IShares Fundamental and RBC Discount 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 IShares Fundamental and RBC Discount into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Fundamental Hedged and RBC Discount Bond, you can compare the effects of market volatilities on IShares Fundamental and RBC Discount 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 IShares Fundamental with a short position of RBC Discount. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Fundamental and RBC Discount.
Diversification Opportunities for IShares Fundamental and RBC Discount
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between IShares and RBC is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding iShares Fundamental Hedged and RBC Discount Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Discount Bond and IShares Fundamental 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 iShares Fundamental Hedged are associated (or correlated) with RBC Discount. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBC Discount Bond has no effect on the direction of IShares Fundamental i.e., IShares Fundamental and RBC Discount go up and down completely randomly.
Pair Corralation between IShares Fundamental and RBC Discount
Assuming the 90 days trading horizon iShares Fundamental Hedged is expected to generate 2.09 times more return on investment than RBC Discount. However, IShares Fundamental is 2.09 times more volatile than RBC Discount Bond. It trades about 0.14 of its potential returns per unit of risk. RBC Discount Bond is currently generating about 0.12 per unit of risk. If you would invest 4,230 in iShares Fundamental Hedged on November 3, 2024 and sell it today you would earn a total of 1,385 from holding iShares Fundamental Hedged or generate 32.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Fundamental Hedged vs. RBC Discount Bond
Performance |
| Timeline |
| iShares Fundamental |
| RBC Discount Bond |
IShares Fundamental and RBC Discount Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Fundamental and RBC Discount
The main advantage of trading using opposite IShares Fundamental and RBC Discount positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Fundamental position performs unexpectedly, RBC Discount 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 Discount will offset losses from the drop in RBC Discount's long position.| IShares Fundamental vs. iShares Convertible Bond | IShares Fundamental vs. iShares SP Mid Cap | IShares Fundamental vs. iShares Edge MSCI | IShares Fundamental vs. iShares Flexible Monthly |
| RBC Discount vs. RBC Target 2029 | RBC Discount vs. RBC Quant Dividend | RBC Discount vs. RBC Quant EAFE | RBC Discount vs. RBC Quant European |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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