Correlation Between Royal Bank and Maple Leaf
Can any of the company-specific risk be diversified away by investing in both Royal Bank and Maple Leaf 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 Royal Bank and Maple Leaf into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Royal Bank of and Maple Leaf Foods, you can compare the effects of market volatilities on Royal Bank and Maple Leaf 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 Royal Bank with a short position of Maple Leaf. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Bank and Maple Leaf.
Diversification Opportunities for Royal Bank and Maple Leaf
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Royal and Maple is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Royal Bank of and Maple Leaf Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maple Leaf Foods and Royal Bank 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 Royal Bank of are associated (or correlated) with Maple Leaf. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maple Leaf Foods has no effect on the direction of Royal Bank i.e., Royal Bank and Maple Leaf go up and down completely randomly.
Pair Corralation between Royal Bank and Maple Leaf
Assuming the 90 days trading horizon Royal Bank of is expected to generate 0.5 times more return on investment than Maple Leaf. However, Royal Bank of is 1.99 times less risky than Maple Leaf. It trades about 0.18 of its potential returns per unit of risk. Maple Leaf Foods is currently generating about -0.02 per unit of risk. If you would invest 1,634 in Royal Bank of on August 25, 2024 and sell it today you would earn a total of 817.00 from holding Royal Bank of or generate 50.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Royal Bank of vs. Maple Leaf Foods
Performance |
| Timeline |
| Royal Bank |
| Maple Leaf Foods |
Royal Bank and Maple Leaf Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Royal Bank and Maple Leaf
The main advantage of trading using opposite Royal Bank and Maple Leaf positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royal Bank position performs unexpectedly, Maple Leaf 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 Maple Leaf will offset losses from the drop in Maple Leaf's long position.| Royal Bank vs. Forstrong Global Income | Royal Bank vs. BMO Aggregate Bond | Royal Bank vs. Terreno Resources Corp | Royal Bank vs. iShares Canadian HYBrid |
| Maple Leaf vs. Saputo Inc | Maple Leaf vs. George Weston Limited | Maple Leaf vs. Empire Company Limited | Maple Leaf vs. Premium Brands Holdings |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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