Correlation Between Royal Bank and Wajax
Can any of the company-specific risk be diversified away by investing in both Royal Bank and Wajax 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 Wajax 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 Wajax, you can compare the effects of market volatilities on Royal Bank and Wajax 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 Wajax. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Bank and Wajax.
Diversification Opportunities for Royal Bank and Wajax
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Royal and Wajax is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Royal Bank of and Wajax in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wajax 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 Wajax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wajax has no effect on the direction of Royal Bank i.e., Royal Bank and Wajax go up and down completely randomly.
Pair Corralation between Royal Bank and Wajax
Assuming the 90 days trading horizon Royal Bank of is expected to generate 0.07 times more return on investment than Wajax. However, Royal Bank of is 15.38 times less risky than Wajax. It trades about 0.17 of its potential returns per unit of risk. Wajax is currently generating about -0.02 per unit of risk. If you would invest 2,435 in Royal Bank of on September 1, 2024 and sell it today you would earn a total of 25.00 from holding Royal Bank of or generate 1.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Royal Bank of vs. Wajax
Performance |
| Timeline |
| Royal Bank |
| Wajax |
Royal Bank and Wajax Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Royal Bank and Wajax
The main advantage of trading using opposite Royal Bank and Wajax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royal Bank position performs unexpectedly, Wajax 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 Wajax will offset losses from the drop in Wajax's long position.| Royal Bank vs. Ramp Metals | Royal Bank vs. Osisko Metals | Royal Bank vs. VIP Entertainment Technologies | Royal Bank vs. Air Canada |
| Wajax vs. Russel Metals | Wajax vs. Bird Construction | Wajax vs. Finning International | Wajax vs. Mullen Group |
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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