Correlation Between Financial and RBC Quant
Can any of the company-specific risk be diversified away by investing in both Financial 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 Financial and RBC Quant into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Financial 15 Split and RBC Quant EAFE, you can compare the effects of market volatilities on Financial 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 Financial with a short position of RBC Quant. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial and RBC Quant.
Diversification Opportunities for Financial and RBC Quant
Excellent diversification
The 3 months correlation between Financial and RBC is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Financial 15 Split and RBC Quant EAFE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Quant EAFE and Financial 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 Financial 15 Split 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 EAFE has no effect on the direction of Financial i.e., Financial and RBC Quant go up and down completely randomly.
Pair Corralation between Financial and RBC Quant
Assuming the 90 days trading horizon Financial 15 Split is expected to under-perform the RBC Quant. In addition to that, Financial is 1.93 times more volatile than RBC Quant EAFE. It trades about -0.05 of its total potential returns per unit of risk. RBC Quant EAFE is currently generating about 0.18 per unit of volatility. If you would invest 2,608 in RBC Quant EAFE on September 19, 2024 and sell it today you would earn a total of 70.00 from holding RBC Quant EAFE or generate 2.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Financial 15 Split vs. RBC Quant EAFE
Performance |
| Timeline |
| Financial 15 Split |
| RBC Quant EAFE |
Financial and RBC Quant Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Financial and RBC Quant
The main advantage of trading using opposite Financial and RBC Quant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financial 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.| Financial vs. Dividend 15 Split | Financial vs. Dividend Growth Split | Financial vs. North American Financial | Financial vs. Life Banc Split |
| RBC Quant vs. RBC Quant Dividend | RBC Quant vs. RBC Quant Canadian | RBC Quant vs. RBC Quant European | RBC Quant vs. RBC Quant Emerging |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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