Correlation Between RBC Quant and IShares MSCI
Can any of the company-specific risk be diversified away by investing in both RBC Quant and IShares MSCI 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 Quant and IShares MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RBC Quant EAFE and iShares MSCI Europe, you can compare the effects of market volatilities on RBC Quant and IShares MSCI 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 Quant with a short position of IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of RBC Quant and IShares MSCI.
Diversification Opportunities for RBC Quant and IShares MSCI
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between RBC and IShares is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding RBC Quant EAFE and iShares MSCI Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI Europe and RBC Quant 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 Quant EAFE are associated (or correlated) with IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI Europe has no effect on the direction of RBC Quant i.e., RBC Quant and IShares MSCI go up and down completely randomly.
Pair Corralation between RBC Quant and IShares MSCI
Assuming the 90 days trading horizon RBC Quant EAFE is expected to generate 1.14 times more return on investment than IShares MSCI. However, RBC Quant is 1.14 times more volatile than iShares MSCI Europe. It trades about 0.17 of its potential returns per unit of risk. iShares MSCI Europe is currently generating about 0.13 per unit of risk. If you would invest 2,653 in RBC Quant EAFE on September 12, 2024 and sell it today you would earn a total of 70.00 from holding RBC Quant EAFE or generate 2.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
RBC Quant EAFE vs. iShares MSCI Europe
Performance |
| Timeline |
| RBC Quant EAFE |
| iShares MSCI Europe |
RBC Quant and IShares MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RBC Quant and IShares MSCI
The main advantage of trading using opposite RBC Quant and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RBC Quant position performs unexpectedly, IShares MSCI 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 MSCI will offset losses from the drop in IShares MSCI's long position.| RBC Quant vs. iShares Core MSCI | RBC Quant vs. BMO MSCI EAFE | RBC Quant vs. Vanguard FTSE Developed | RBC Quant vs. iShares MSCI EAFE |
| IShares MSCI vs. iShares MSCI Europe | IShares MSCI vs. BMO MSCI Europe | IShares MSCI vs. iShares India Index | IShares MSCI vs. iShares China |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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