Correlation Between Royal Bank and Loblaw Companies
Can any of the company-specific risk be diversified away by investing in both Royal Bank and Loblaw Companies 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 Loblaw Companies 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 Loblaw Companies Limited, you can compare the effects of market volatilities on Royal Bank and Loblaw Companies 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 Loblaw Companies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Bank and Loblaw Companies.
Diversification Opportunities for Royal Bank and Loblaw Companies
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Royal and Loblaw is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Royal Bank of and Loblaw Companies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loblaw Companies 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 Loblaw Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loblaw Companies has no effect on the direction of Royal Bank i.e., Royal Bank and Loblaw Companies go up and down completely randomly.
Pair Corralation between Royal Bank and Loblaw Companies
Assuming the 90 days trading horizon Royal Bank of is expected to generate 0.53 times more return on investment than Loblaw Companies. However, Royal Bank of is 1.89 times less risky than Loblaw Companies. It trades about 0.15 of its potential returns per unit of risk. Loblaw Companies Limited is currently generating about -0.37 per unit of risk. If you would invest 2,427 in Royal Bank of on October 14, 2024 and sell it today you would earn a total of 29.00 from holding Royal Bank of or generate 1.19% 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. Loblaw Companies Limited
Performance |
| Timeline |
| Royal Bank |
| Loblaw Companies |
Royal Bank and Loblaw Companies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Royal Bank and Loblaw Companies
The main advantage of trading using opposite Royal Bank and Loblaw Companies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royal Bank position performs unexpectedly, Loblaw Companies 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 Loblaw Companies will offset losses from the drop in Loblaw Companies' long position.| Royal Bank vs. Nano One Materials | Royal Bank vs. Birchtech Corp | Royal Bank vs. Champion Gaming Group | Royal Bank vs. Canadian Utilities Limited |
| Loblaw Companies vs. Metro Inc | Loblaw Companies vs. George Weston Limited | Loblaw Companies vs. Canadian Tire | Loblaw Companies vs. Dollarama |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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