Correlation Between Royal Bank and Aritzia
Can any of the company-specific risk be diversified away by investing in both Royal Bank and Aritzia 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 Aritzia 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 Aritzia, you can compare the effects of market volatilities on Royal Bank and Aritzia 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 Aritzia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Bank and Aritzia.
Diversification Opportunities for Royal Bank and Aritzia
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Royal and Aritzia is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Royal Bank of and Aritzia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aritzia 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 Aritzia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aritzia has no effect on the direction of Royal Bank i.e., Royal Bank and Aritzia go up and down completely randomly.
Pair Corralation between Royal Bank and Aritzia
Assuming the 90 days trading horizon Royal Bank is expected to generate 2.14 times less return on investment than Aritzia. But when comparing it to its historical volatility, Royal Bank of is 3.74 times less risky than Aritzia. It trades about 0.13 of its potential returns per unit of risk. Aritzia is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 2,484 in Aritzia on August 26, 2024 and sell it today you would earn a total of 1,897 from holding Aritzia or generate 76.37% 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. Aritzia
Performance |
| Timeline |
| Royal Bank |
| Aritzia |
Royal Bank and Aritzia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Royal Bank and Aritzia
The main advantage of trading using opposite Royal Bank and Aritzia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royal Bank position performs unexpectedly, Aritzia 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 Aritzia will offset losses from the drop in Aritzia'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 |
| Aritzia vs. Canada Goose Holdings | Aritzia vs. Restaurant Brands International | Aritzia vs. Lightspeed Commerce | Aritzia vs. goeasy |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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