Correlation Between Royal Bank and Aecon
Can any of the company-specific risk be diversified away by investing in both Royal Bank and Aecon 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 Aecon 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 Aecon Group, you can compare the effects of market volatilities on Royal Bank and Aecon 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 Aecon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Bank and Aecon.
Diversification Opportunities for Royal Bank and Aecon
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Royal and Aecon is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Royal Bank of and Aecon Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aecon Group 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 Aecon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aecon Group has no effect on the direction of Royal Bank i.e., Royal Bank and Aecon go up and down completely randomly.
Pair Corralation between Royal Bank and Aecon
Assuming the 90 days trading horizon Royal Bank is expected to generate 19.24 times less return on investment than Aecon. But when comparing it to its historical volatility, Royal Bank of is 10.36 times less risky than Aecon. It trades about 0.16 of its potential returns per unit of risk. Aecon Group is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 2,269 in Aecon Group on August 28, 2024 and sell it today you would earn a total of 643.00 from holding Aecon Group or generate 28.34% 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. Aecon Group
Performance |
| Timeline |
| Royal Bank |
| Aecon Group |
Royal Bank and Aecon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Royal Bank and Aecon
The main advantage of trading using opposite Royal Bank and Aecon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royal Bank position performs unexpectedly, Aecon 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 Aecon will offset losses from the drop in Aecon'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 |
| Aecon vs. Stantec | Aecon vs. Martinrea International | Aecon vs. Finning International | Aecon vs. WSP Global |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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