Correlation Between Royal Bank and Onex Corp
Can any of the company-specific risk be diversified away by investing in both Royal Bank and Onex Corp 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 Onex Corp 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 Onex Corp, you can compare the effects of market volatilities on Royal Bank and Onex Corp 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 Onex Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Bank and Onex Corp.
Diversification Opportunities for Royal Bank and Onex Corp
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Royal and Onex is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Royal Bank of and Onex Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Onex Corp 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 Onex Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Onex Corp has no effect on the direction of Royal Bank i.e., Royal Bank and Onex Corp go up and down completely randomly.
Pair Corralation between Royal Bank and Onex Corp
Assuming the 90 days trading horizon Royal Bank is expected to generate 18.58 times less return on investment than Onex Corp. But when comparing it to its historical volatility, Royal Bank of is 6.46 times less risky than Onex Corp. It trades about 0.1 of its potential returns per unit of risk. Onex Corp is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 10,022 in Onex Corp on September 1, 2024 and sell it today you would earn a total of 1,367 from holding Onex Corp or generate 13.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Royal Bank of vs. Onex Corp
Performance |
| Timeline |
| Royal Bank |
| Onex Corp |
Royal Bank and Onex Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Royal Bank and Onex Corp
The main advantage of trading using opposite Royal Bank and Onex Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royal Bank position performs unexpectedly, Onex Corp 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 Onex Corp will offset losses from the drop in Onex Corp's long position.| Royal Bank vs. Fairfax Financial Holdings | Royal Bank vs. iShares Canadian HYBrid | Royal Bank vs. Brompton European Dividend | Royal Bank vs. Solar Alliance Energy |
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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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