Correlation Between RBC Discount and RBC Target
Can any of the company-specific risk be diversified away by investing in both RBC Discount and RBC Target 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 Discount and RBC Target into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RBC Discount Bond and RBC Target 2029, you can compare the effects of market volatilities on RBC Discount and RBC Target 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 Discount with a short position of RBC Target. Check out your portfolio center. Please also check ongoing floating volatility patterns of RBC Discount and RBC Target.
Diversification Opportunities for RBC Discount and RBC Target
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between RBC and RBC is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding RBC Discount Bond and RBC Target 2029 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Target 2029 and RBC Discount 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 Discount Bond are associated (or correlated) with RBC Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBC Target 2029 has no effect on the direction of RBC Discount i.e., RBC Discount and RBC Target go up and down completely randomly.
Pair Corralation between RBC Discount and RBC Target
Assuming the 90 days trading horizon RBC Discount Bond is expected to generate 1.68 times more return on investment than RBC Target. However, RBC Discount is 1.68 times more volatile than RBC Target 2029. It trades about 0.22 of its potential returns per unit of risk. RBC Target 2029 is currently generating about 0.16 per unit of risk. If you would invest 2,118 in RBC Discount Bond on September 1, 2024 and sell it today you would earn a total of 46.00 from holding RBC Discount Bond or generate 2.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
RBC Discount Bond vs. RBC Target 2029
Performance |
| Timeline |
| RBC Discount Bond |
| RBC Target 2029 |
RBC Discount and RBC Target Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RBC Discount and RBC Target
The main advantage of trading using opposite RBC Discount and RBC Target positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RBC Discount position performs unexpectedly, RBC Target 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 Target will offset losses from the drop in RBC Target's long position.| RBC Discount vs. RBC Target 2029 | RBC Discount vs. RBC Quant Dividend | RBC Discount vs. RBC Quant EAFE | RBC Discount vs. RBC Quant European |
| RBC Target vs. RBC Quant Dividend | RBC Target vs. RBC Quant EAFE | RBC Target vs. RBC Quant European | RBC Target vs. RBC Target 2026 |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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