Correlation Between RBC Quant and RBC Discount
Can any of the company-specific risk be diversified away by investing in both RBC Quant and RBC Discount 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 RBC Discount 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 RBC Discount Bond, you can compare the effects of market volatilities on RBC Quant and RBC Discount 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 RBC Discount. Check out your portfolio center. Please also check ongoing floating volatility patterns of RBC Quant and RBC Discount.
Diversification Opportunities for RBC Quant and RBC Discount
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between RBC and RBC is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding RBC Quant EAFE and RBC Discount Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Discount Bond 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 RBC Discount. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBC Discount Bond has no effect on the direction of RBC Quant i.e., RBC Quant and RBC Discount go up and down completely randomly.
Pair Corralation between RBC Quant and RBC Discount
Assuming the 90 days trading horizon RBC Quant is expected to generate 1.59 times less return on investment than RBC Discount. In addition to that, RBC Quant is 1.51 times more volatile than RBC Discount Bond. It trades about 0.08 of its total potential returns per unit of risk. RBC Discount Bond is currently generating about 0.2 per unit of volatility. If you would invest 2,121 in RBC Discount Bond on November 2, 2024 and sell it today you would earn a total of 103.00 from holding RBC Discount Bond or generate 4.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
RBC Quant EAFE vs. RBC Discount Bond
Performance |
| Timeline |
| RBC Quant EAFE |
| RBC Discount Bond |
RBC Quant and RBC Discount Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RBC Quant and RBC Discount
The main advantage of trading using opposite RBC Quant and RBC Discount positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RBC Quant position performs unexpectedly, RBC Discount 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 Discount will offset losses from the drop in RBC Discount's long position.| RBC Quant vs. RBC Quant Dividend | RBC Quant vs. RBC Quant European | RBC Quant vs. RBC Quant EAFE | RBC Quant vs. RBC PHN Short |
| RBC Discount vs. RBC Target 2029 | RBC Discount vs. RBC Quant Dividend | RBC Discount vs. RBC Quant EAFE | RBC Discount vs. RBC Quant European |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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