Correlation Between RBC Target and NBI Sustainable
Can any of the company-specific risk be diversified away by investing in both RBC Target and NBI Sustainable 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 Target and NBI Sustainable into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RBC Target 2027 and NBI Sustainable Canadian, you can compare the effects of market volatilities on RBC Target and NBI Sustainable 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 Target with a short position of NBI Sustainable. Check out your portfolio center. Please also check ongoing floating volatility patterns of RBC Target and NBI Sustainable.
Diversification Opportunities for RBC Target and NBI Sustainable
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between RBC and NBI is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding RBC Target 2027 and NBI Sustainable Canadian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NBI Sustainable Canadian and RBC Target 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 Target 2027 are associated (or correlated) with NBI Sustainable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NBI Sustainable Canadian has no effect on the direction of RBC Target i.e., RBC Target and NBI Sustainable go up and down completely randomly.
Pair Corralation between RBC Target and NBI Sustainable
Assuming the 90 days trading horizon RBC Target 2027 is expected to generate 0.39 times more return on investment than NBI Sustainable. However, RBC Target 2027 is 2.55 times less risky than NBI Sustainable. It trades about -0.11 of its potential returns per unit of risk. NBI Sustainable Canadian is currently generating about -0.09 per unit of risk. If you would invest 1,818 in RBC Target 2027 on August 24, 2024 and sell it today you would lose (5.00) from holding RBC Target 2027 or give up 0.28% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
RBC Target 2027 vs. NBI Sustainable Canadian
Performance |
| Timeline |
| RBC Target 2027 |
| NBI Sustainable Canadian |
RBC Target and NBI Sustainable Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RBC Target and NBI Sustainable
The main advantage of trading using opposite RBC Target and NBI Sustainable positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RBC Target position performs unexpectedly, NBI Sustainable 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 NBI Sustainable will offset losses from the drop in NBI Sustainable's long position.The idea behind RBC Target 2027 and NBI Sustainable Canadian pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| NBI Sustainable vs. iShares Floating Rate | NBI Sustainable vs. iShares 1 10Yr Laddered | NBI Sustainable vs. Forstrong Global Income | NBI Sustainable vs. BMO Aggregate Bond |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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