Correlation Between Royal Bank and Postmedia Network
Can any of the company-specific risk be diversified away by investing in both Royal Bank and Postmedia Network 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 Postmedia Network 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 Postmedia Network Canada, you can compare the effects of market volatilities on Royal Bank and Postmedia Network 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 Postmedia Network. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Bank and Postmedia Network.
Diversification Opportunities for Royal Bank and Postmedia Network
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Royal and Postmedia is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Royal Bank of and Postmedia Network Canada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Postmedia Network Canada 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 Postmedia Network. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Postmedia Network Canada has no effect on the direction of Royal Bank i.e., Royal Bank and Postmedia Network go up and down completely randomly.
Pair Corralation between Royal Bank and Postmedia Network
Assuming the 90 days trading horizon Royal Bank is expected to generate 1.71 times less return on investment than Postmedia Network. But when comparing it to its historical volatility, Royal Bank of is 6.99 times less risky than Postmedia Network. It trades about 0.11 of its potential returns per unit of risk. Postmedia Network Canada is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 125.00 in Postmedia Network Canada on August 31, 2024 and sell it today you would earn a total of 0.00 from holding Postmedia Network Canada or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.73% |
| Values | Daily Returns |
Royal Bank of vs. Postmedia Network Canada
Performance |
| Timeline |
| Royal Bank |
| Postmedia Network Canada |
Royal Bank and Postmedia Network Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Royal Bank and Postmedia Network
The main advantage of trading using opposite Royal Bank and Postmedia Network positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royal Bank position performs unexpectedly, Postmedia Network 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 Postmedia Network will offset losses from the drop in Postmedia Network'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 |
| Postmedia Network vs. Cielo Waste Solutions | Postmedia Network vs. Eros Resources Corp | Postmedia Network vs. Forstrong Global Income | Postmedia Network vs. iShares Canadian HYBrid |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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