Correlation Between Royal Bank and AGF Management
Can any of the company-specific risk be diversified away by investing in both Royal Bank and AGF Management 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 AGF Management 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 AGF Management Limited, you can compare the effects of market volatilities on Royal Bank and AGF Management 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 AGF Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Bank and AGF Management.
Diversification Opportunities for Royal Bank and AGF Management
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Royal and AGF is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Royal Bank of and AGF Management Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AGF Management 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 AGF Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AGF Management has no effect on the direction of Royal Bank i.e., Royal Bank and AGF Management go up and down completely randomly.
Pair Corralation between Royal Bank and AGF Management
Assuming the 90 days trading horizon Royal Bank is expected to generate 1.85 times less return on investment than AGF Management. But when comparing it to its historical volatility, Royal Bank of is 1.57 times less risky than AGF Management. It trades about 0.07 of its potential returns per unit of risk. AGF Management Limited is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 592.00 in AGF Management Limited on August 26, 2024 and sell it today you would earn a total of 482.00 from holding AGF Management Limited or generate 81.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Royal Bank of vs. AGF Management Limited
Performance |
| Timeline |
| Royal Bank |
| AGF Management |
Royal Bank and AGF Management Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Royal Bank and AGF Management
The main advantage of trading using opposite Royal Bank and AGF Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royal Bank position performs unexpectedly, AGF Management 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 AGF Management will offset losses from the drop in AGF Management's long position.| Royal Bank vs. AGF Management Limited | Royal Bank vs. Primaris Retail RE | Royal Bank vs. WELL Health Technologies | Royal Bank vs. Reliq Health Technologies |
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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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