Correlation Between Royal Bank and Canso Credit
Can any of the company-specific risk be diversified away by investing in both Royal Bank and Canso Credit 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 Canso Credit 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 Canso Credit Trust, you can compare the effects of market volatilities on Royal Bank and Canso Credit 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 Canso Credit. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Bank and Canso Credit.
Diversification Opportunities for Royal Bank and Canso Credit
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Royal and Canso is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Royal Bank of and Canso Credit Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canso Credit Trust 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 Canso Credit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canso Credit Trust has no effect on the direction of Royal Bank i.e., Royal Bank and Canso Credit go up and down completely randomly.
Pair Corralation between Royal Bank and Canso Credit
Assuming the 90 days trading horizon Royal Bank of is expected to generate 1.87 times more return on investment than Canso Credit. However, Royal Bank is 1.87 times more volatile than Canso Credit Trust. It trades about 0.07 of its potential returns per unit of risk. Canso Credit Trust is currently generating about 0.08 per unit of risk. If you would invest 1,845 in Royal Bank of on August 31, 2024 and sell it today you would earn a total of 616.00 from holding Royal Bank of or generate 33.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.79% |
| Values | Daily Returns |
Royal Bank of vs. Canso Credit Trust
Performance |
| Timeline |
| Royal Bank |
| Canso Credit Trust |
Royal Bank and Canso Credit Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Royal Bank and Canso Credit
The main advantage of trading using opposite Royal Bank and Canso Credit positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royal Bank position performs unexpectedly, Canso Credit 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 Canso Credit will offset losses from the drop in Canso Credit's long position.| Royal Bank vs. Fairfax Financial Holdings | Royal Bank vs. Fairfax Financial Holdings | Royal Bank vs. iShares Canadian HYBrid | Royal Bank vs. Brompton European Dividend |
| Canso Credit vs. MINT Income Fund | Canso Credit vs. Canadian High Income | Canso Credit vs. Blue Ribbon Income | Canso Credit vs. Australian REIT Income |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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