Correlation Between CI Europe and RBC Quant
Can any of the company-specific risk be diversified away by investing in both CI Europe and RBC Quant 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 CI Europe and RBC Quant into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CI Europe Hedged and RBC Quant European, you can compare the effects of market volatilities on CI Europe and RBC Quant 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 CI Europe with a short position of RBC Quant. Check out your portfolio center. Please also check ongoing floating volatility patterns of CI Europe and RBC Quant.
Diversification Opportunities for CI Europe and RBC Quant
Poor diversification
The 3 months correlation between EHE and RBC is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding CI Europe Hedged and RBC Quant European in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Quant European and CI Europe 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 CI Europe Hedged are associated (or correlated) with RBC Quant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBC Quant European has no effect on the direction of CI Europe i.e., CI Europe and RBC Quant go up and down completely randomly.
Pair Corralation between CI Europe and RBC Quant
Assuming the 90 days trading horizon CI Europe Hedged is expected to under-perform the RBC Quant. In addition to that, CI Europe is 1.2 times more volatile than RBC Quant European. It trades about -0.11 of its total potential returns per unit of risk. RBC Quant European is currently generating about -0.07 per unit of volatility. If you would invest 2,626 in RBC Quant European on September 1, 2024 and sell it today you would lose (26.00) from holding RBC Quant European or give up 0.99% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CI Europe Hedged vs. RBC Quant European
Performance |
| Timeline |
| CI Europe Hedged |
| RBC Quant European |
CI Europe and RBC Quant Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CI Europe and RBC Quant
The main advantage of trading using opposite CI Europe and RBC Quant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CI Europe position performs unexpectedly, RBC Quant 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 Quant will offset losses from the drop in RBC Quant's long position.| CI Europe vs. NBI High Yield | CI Europe vs. NBI Unconstrained Fixed | CI Europe vs. Mackenzie Developed ex North | CI Europe vs. BMO Short Term Bond |
| RBC Quant vs. BMO Europe High | RBC Quant vs. BMO High Dividend | RBC Quant vs. BMO Covered Call | RBC Quant vs. BMO Global High |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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