Correlation Between City National and Growth Equity
Can any of the company-specific risk be diversified away by investing in both City National and Growth Equity 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 City National and Growth Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between City National Rochdale and Growth Equity Investor, you can compare the effects of market volatilities on City National and Growth Equity 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 City National with a short position of Growth Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of City National and Growth Equity.
Diversification Opportunities for City National and Growth Equity
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between City and Growth is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding City National Rochdale and Growth Equity Investor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Growth Equity Investor and City National 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 City National Rochdale are associated (or correlated) with Growth Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Growth Equity Investor has no effect on the direction of City National i.e., City National and Growth Equity go up and down completely randomly.
Pair Corralation between City National and Growth Equity
Assuming the 90 days horizon City National is expected to generate 2.9 times less return on investment than Growth Equity. But when comparing it to its historical volatility, City National Rochdale is 8.33 times less risky than Growth Equity. It trades about 0.25 of its potential returns per unit of risk. Growth Equity Investor is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,720 in Growth Equity Investor on September 13, 2024 and sell it today you would earn a total of 1,053 from holding Growth Equity Investor or generate 61.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
City National Rochdale vs. Growth Equity Investor
Performance |
| Timeline |
| City National Rochdale |
| Growth Equity Investor |
City National and Growth Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with City National and Growth Equity
The main advantage of trading using opposite City National and Growth Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if City National position performs unexpectedly, Growth Equity 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 Growth Equity will offset losses from the drop in Growth Equity's long position.| City National vs. Deutsche Real Estate | City National vs. Short Real Estate | City National vs. Sa Real Estate | City National vs. Jhancock Real Estate |
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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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