Correlation Between RBC 1 and RBC Quant
Can any of the company-specific risk be diversified away by investing in both RBC 1 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 RBC 1 and RBC Quant into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RBC 1 5 Year and RBC Quant Canadian, you can compare the effects of market volatilities on RBC 1 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 RBC 1 with a short position of RBC Quant. Check out your portfolio center. Please also check ongoing floating volatility patterns of RBC 1 and RBC Quant.
Diversification Opportunities for RBC 1 and RBC Quant
Poor diversification
The 3 months correlation between RBC and RBC is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding RBC 1 5 Year and RBC Quant Canadian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Quant Canadian and RBC 1 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 RBC 1 5 Year 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 Canadian has no effect on the direction of RBC 1 i.e., RBC 1 and RBC Quant go up and down completely randomly.
Pair Corralation between RBC 1 and RBC Quant
Assuming the 90 days trading horizon RBC 1 is expected to generate 3.48 times less return on investment than RBC Quant. But when comparing it to its historical volatility, RBC 1 5 Year is 3.61 times less risky than RBC Quant. It trades about 0.18 of its potential returns per unit of risk. RBC Quant Canadian is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 2,270 in RBC Quant Canadian on September 1, 2024 and sell it today you would earn a total of 739.00 from holding RBC Quant Canadian or generate 32.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.63% |
| Values | Daily Returns |
RBC 1 5 Year vs. RBC Quant Canadian
Performance |
| Timeline |
| RBC 1 5 |
| RBC Quant Canadian |
RBC 1 and RBC Quant Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RBC 1 and RBC Quant
The main advantage of trading using opposite RBC 1 and RBC Quant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RBC 1 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.| RBC 1 vs. Vanguard Total Market | RBC 1 vs. iShares High Quality | RBC 1 vs. iShares 1 10Yr Laddered | RBC 1 vs. iShares Canadian HYBrid |
| RBC Quant vs. RBC Quant Dividend | RBC Quant vs. RBC Quant EAFE | RBC Quant vs. Invesco Canadian Dividend | RBC Quant vs. RBC Canadian Preferred |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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