Correlation Between Royal Bank and Boralex
Can any of the company-specific risk be diversified away by investing in both Royal Bank and Boralex 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 Boralex 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 Boralex, you can compare the effects of market volatilities on Royal Bank and Boralex 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 Boralex. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Bank and Boralex.
Diversification Opportunities for Royal Bank and Boralex
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Royal and Boralex is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Royal Bank of and Boralex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boralex 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 Boralex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boralex has no effect on the direction of Royal Bank i.e., Royal Bank and Boralex go up and down completely randomly.
Pair Corralation between Royal Bank and Boralex
Assuming the 90 days trading horizon Royal Bank of is expected to generate 0.2 times more return on investment than Boralex. However, Royal Bank of is 5.13 times less risky than Boralex. It trades about 0.04 of its potential returns per unit of risk. Boralex is currently generating about -0.35 per unit of risk. If you would invest 2,407 in Royal Bank of on August 29, 2024 and sell it today you would earn a total of 7.00 from holding Royal Bank of or generate 0.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Royal Bank of vs. Boralex
Performance |
| Timeline |
| Royal Bank |
| Boralex |
Royal Bank and Boralex Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Royal Bank and Boralex
The main advantage of trading using opposite Royal Bank and Boralex positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royal Bank position performs unexpectedly, Boralex 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 Boralex will offset losses from the drop in Boralex's long position.| Royal Bank vs. Labrador Iron Ore | Royal Bank vs. Dream Office Real | Royal Bank vs. 2028 Investment Grade | Royal Bank vs. Cogeco Communications |
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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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