Correlation Between RBC Target and IShares Core
Can any of the company-specific risk be diversified away by investing in both RBC Target and IShares Core 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 IShares Core 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 iShares Core Canadian, you can compare the effects of market volatilities on RBC Target and IShares Core 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 IShares Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of RBC Target and IShares Core.
Diversification Opportunities for RBC Target and IShares Core
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between RBC and IShares is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding RBC Target 2027 and iShares Core Canadian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core 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 IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core Canadian has no effect on the direction of RBC Target i.e., RBC Target and IShares Core go up and down completely randomly.
Pair Corralation between RBC Target and IShares Core
Assuming the 90 days trading horizon RBC Target 2027 is expected to generate 3.16 times more return on investment than IShares Core. However, RBC Target is 3.16 times more volatile than iShares Core Canadian. It trades about 0.02 of its potential returns per unit of risk. iShares Core Canadian is currently generating about 0.06 per unit of risk. If you would invest 1,653 in RBC Target 2027 on August 27, 2024 and sell it today you would earn a total of 156.00 from holding RBC Target 2027 or generate 9.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.56% |
| Values | Daily Returns |
RBC Target 2027 vs. iShares Core Canadian
Performance |
| Timeline |
| RBC Target 2027 |
| iShares Core Canadian |
RBC Target and IShares Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RBC Target and IShares Core
The main advantage of trading using opposite RBC Target and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RBC Target position performs unexpectedly, IShares Core 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 IShares Core will offset losses from the drop in IShares Core's long position.| RBC Target vs. Franklin Global Aggregate | RBC Target vs. Franklin Large Cap | RBC Target vs. First Trust Senior | RBC Target vs. BMO Aggregate Bond |
| IShares Core vs. Franklin Global Aggregate | IShares Core vs. Franklin Large Cap | IShares Core vs. First Trust Senior | IShares Core 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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