Correlation Between RBC Canadian and CI Preferred
Can any of the company-specific risk be diversified away by investing in both RBC Canadian and CI Preferred 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 Canadian and CI Preferred into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RBC Canadian Preferred and CI Preferred Share, you can compare the effects of market volatilities on RBC Canadian and CI Preferred 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 Canadian with a short position of CI Preferred. Check out your portfolio center. Please also check ongoing floating volatility patterns of RBC Canadian and CI Preferred.
Diversification Opportunities for RBC Canadian and CI Preferred
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between RBC and FPR is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding RBC Canadian Preferred and CI Preferred Share in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CI Preferred Share and RBC Canadian 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 Canadian Preferred are associated (or correlated) with CI Preferred. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CI Preferred Share has no effect on the direction of RBC Canadian i.e., RBC Canadian and CI Preferred go up and down completely randomly.
Pair Corralation between RBC Canadian and CI Preferred
Assuming the 90 days trading horizon RBC Canadian Preferred is expected to generate 0.87 times more return on investment than CI Preferred. However, RBC Canadian Preferred is 1.15 times less risky than CI Preferred. It trades about 0.51 of its potential returns per unit of risk. CI Preferred Share is currently generating about 0.33 per unit of risk. If you would invest 2,070 in RBC Canadian Preferred on September 18, 2024 and sell it today you would earn a total of 82.00 from holding RBC Canadian Preferred or generate 3.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
RBC Canadian Preferred vs. CI Preferred Share
Performance |
| Timeline |
| RBC Canadian Preferred |
| CI Preferred Share |
RBC Canadian and CI Preferred Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RBC Canadian and CI Preferred
The main advantage of trading using opposite RBC Canadian and CI Preferred positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RBC Canadian position performs unexpectedly, CI Preferred 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 CI Preferred will offset losses from the drop in CI Preferred's long position.| RBC Canadian vs. iShares 1 5 Year | RBC Canadian vs. iShares 1 5 Year | RBC Canadian vs. iShares Core Canadian | RBC Canadian vs. iShares Global Monthly |
| CI Preferred vs. iShares 1 5 Year | CI Preferred vs. iShares 1 5 Year | CI Preferred vs. iShares Core Canadian | CI Preferred vs. iShares Global Monthly |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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