Correlation Between Royal Canadian and IShares Gold
Can any of the company-specific risk be diversified away by investing in both Royal Canadian and IShares Gold 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 Canadian and IShares Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Royal Canadian Mint and iShares Gold Bullion, you can compare the effects of market volatilities on Royal Canadian and IShares Gold 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 Canadian with a short position of IShares Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Canadian and IShares Gold.
Diversification Opportunities for Royal Canadian and IShares Gold
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Royal and IShares is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Royal Canadian Mint and iShares Gold Bullion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Gold Bullion and Royal Canadian 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 Canadian Mint are associated (or correlated) with IShares Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Gold Bullion has no effect on the direction of Royal Canadian i.e., Royal Canadian and IShares Gold go up and down completely randomly.
Pair Corralation between Royal Canadian and IShares Gold
Assuming the 90 days trading horizon Royal Canadian Mint is expected to generate 1.88 times more return on investment than IShares Gold. However, Royal Canadian is 1.88 times more volatile than iShares Gold Bullion. It trades about 0.05 of its potential returns per unit of risk. iShares Gold Bullion is currently generating about 0.09 per unit of risk. If you would invest 1,701 in Royal Canadian Mint on August 27, 2024 and sell it today you would earn a total of 738.00 from holding Royal Canadian Mint or generate 43.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Royal Canadian Mint vs. iShares Gold Bullion
Performance |
| Timeline |
| Royal Canadian Mint |
| iShares Gold Bullion |
Royal Canadian and IShares Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Royal Canadian and IShares Gold
The main advantage of trading using opposite Royal Canadian and IShares Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royal Canadian position performs unexpectedly, IShares Gold 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 IShares Gold will offset losses from the drop in IShares Gold's long position.| Royal Canadian vs. Saputo Inc | Royal Canadian vs. CCL Industries | Royal Canadian vs. Thomson Reuters Corp | Royal Canadian vs. George Weston Limited |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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