Correlation Between RBC Quant and Vanguard FTSE
Can any of the company-specific risk be diversified away by investing in both RBC Quant and Vanguard FTSE 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 Vanguard FTSE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RBC Quant European and Vanguard FTSE Developed, you can compare the effects of market volatilities on RBC Quant and Vanguard FTSE 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 Vanguard FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of RBC Quant and Vanguard FTSE.
Diversification Opportunities for RBC Quant and Vanguard FTSE
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between RBC and Vanguard is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding RBC Quant European and Vanguard FTSE Developed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard FTSE Developed 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 European are associated (or correlated) with Vanguard FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard FTSE Developed has no effect on the direction of RBC Quant i.e., RBC Quant and Vanguard FTSE go up and down completely randomly.
Pair Corralation between RBC Quant and Vanguard FTSE
Assuming the 90 days trading horizon RBC Quant European is expected to generate 0.82 times more return on investment than Vanguard FTSE. However, RBC Quant European is 1.22 times less risky than Vanguard FTSE. It trades about -0.07 of its potential returns per unit of risk. Vanguard FTSE Developed is currently generating about -0.13 per unit of risk. If you would invest 2,628 in RBC Quant European on August 31, 2024 and sell it today you would lose (28.00) from holding RBC Quant European or give up 1.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
RBC Quant European vs. Vanguard FTSE Developed
Performance |
| Timeline |
| RBC Quant European |
| Vanguard FTSE Developed |
RBC Quant and Vanguard FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RBC Quant and Vanguard FTSE
The main advantage of trading using opposite RBC Quant and Vanguard FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RBC Quant position performs unexpectedly, Vanguard FTSE 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 Vanguard FTSE will offset losses from the drop in Vanguard FTSE's long position.| RBC Quant vs. RBC Quant European | RBC Quant vs. RBC Quant EAFE | RBC Quant vs. RBC Quant Dividend | RBC Quant vs. RBC Quant Canadian |
| Vanguard FTSE vs. Vanguard FTSE Developed | Vanguard FTSE vs. Vanguard FTSE Emerging | Vanguard FTSE vs. Vanguard FTSE Developed | Vanguard FTSE vs. Vanguard Dividend Appreciation |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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