Correlation Between Royal Bank and Western Copper
Can any of the company-specific risk be diversified away by investing in both Royal Bank and Western Copper 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 Western Copper 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 Western Copper and, you can compare the effects of market volatilities on Royal Bank and Western Copper 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 Western Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Bank and Western Copper.
Diversification Opportunities for Royal Bank and Western Copper
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Royal and Western is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Royal Bank of and Western Copper and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Copper 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 Western Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Copper has no effect on the direction of Royal Bank i.e., Royal Bank and Western Copper go up and down completely randomly.
Pair Corralation between Royal Bank and Western Copper
Assuming the 90 days trading horizon Royal Bank is expected to generate 2.23 times less return on investment than Western Copper. But when comparing it to its historical volatility, Royal Bank of is 10.14 times less risky than Western Copper. It trades about 0.11 of its potential returns per unit of risk. Western Copper and is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 159.00 in Western Copper and on August 27, 2024 and sell it today you would earn a total of 1.00 from holding Western Copper and or generate 0.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Royal Bank of vs. Western Copper and
Performance |
| Timeline |
| Royal Bank |
| Western Copper |
Royal Bank and Western Copper Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Royal Bank and Western Copper
The main advantage of trading using opposite Royal Bank and Western Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royal Bank position performs unexpectedly, Western Copper 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 Western Copper will offset losses from the drop in Western Copper's long position.| Royal Bank vs. Forstrong Global Income | Royal Bank vs. BMO Aggregate Bond | Royal Bank vs. Terreno Resources Corp | Royal Bank vs. iShares Canadian HYBrid |
| Western Copper vs. First Majestic Silver | Western Copper vs. Ivanhoe Energy | Western Copper vs. Orezone Gold Corp | Western Copper vs. Faraday Copper Corp |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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