Correlation Between RBC Target and RBC Short
Can any of the company-specific risk be diversified away by investing in both RBC Target and RBC Short 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 RBC Short into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RBC Target 2029 and RBC Short Term, you can compare the effects of market volatilities on RBC Target and RBC Short 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 RBC Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of RBC Target and RBC Short.
Diversification Opportunities for RBC Target and RBC Short
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between RBC and RBC is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding RBC Target 2029 and RBC Short Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Short Term 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 2029 are associated (or correlated) with RBC Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBC Short Term has no effect on the direction of RBC Target i.e., RBC Target and RBC Short go up and down completely randomly.
Pair Corralation between RBC Target and RBC Short
Assuming the 90 days trading horizon RBC Target is expected to generate 1.43 times less return on investment than RBC Short. But when comparing it to its historical volatility, RBC Target 2029 is 1.14 times less risky than RBC Short. It trades about 0.14 of its potential returns per unit of risk. RBC Short Term is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 2,029 in RBC Short Term on August 25, 2024 and sell it today you would earn a total of 123.00 from holding RBC Short Term or generate 6.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
RBC Target 2029 vs. RBC Short Term
Performance |
| Timeline |
| RBC Target 2029 |
| RBC Short Term |
RBC Target and RBC Short Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RBC Target and RBC Short
The main advantage of trading using opposite RBC Target and RBC Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RBC Target position performs unexpectedly, RBC Short 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 RBC Short will offset losses from the drop in RBC Short'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 |
| RBC Short vs. RBC Target 2029 | RBC Short vs. RBC Quant Dividend | RBC Short vs. RBC Quant EAFE | RBC Short vs. RBC Quant European |
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.
Other Complementary Tools
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals |