Correlation Between Royal Bank and Brookfield Infrastructure
Can any of the company-specific risk be diversified away by investing in both Royal Bank and Brookfield Infrastructure 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 Brookfield Infrastructure 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 Brookfield Infrastructure Partners, you can compare the effects of market volatilities on Royal Bank and Brookfield Infrastructure 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 Brookfield Infrastructure. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Bank and Brookfield Infrastructure.
Diversification Opportunities for Royal Bank and Brookfield Infrastructure
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Royal and Brookfield is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Royal Bank of and Brookfield Infrastructure Part in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Infrastructure 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 Brookfield Infrastructure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Infrastructure has no effect on the direction of Royal Bank i.e., Royal Bank and Brookfield Infrastructure go up and down completely randomly.
Pair Corralation between Royal Bank and Brookfield Infrastructure
Assuming the 90 days trading horizon Royal Bank is expected to generate 2.11 times less return on investment than Brookfield Infrastructure. But when comparing it to its historical volatility, Royal Bank of is 1.59 times less risky than Brookfield Infrastructure. It trades about 0.1 of its potential returns per unit of risk. Brookfield Infrastructure Partners is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 2,425 in Brookfield Infrastructure Partners on September 20, 2024 and sell it today you would earn a total of 88.00 from holding Brookfield Infrastructure Partners or generate 3.63% 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. Brookfield Infrastructure Part
Performance |
| Timeline |
| Royal Bank |
| Brookfield Infrastructure |
Royal Bank and Brookfield Infrastructure Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Royal Bank and Brookfield Infrastructure
The main advantage of trading using opposite Royal Bank and Brookfield Infrastructure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royal Bank position performs unexpectedly, Brookfield Infrastructure 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 Brookfield Infrastructure will offset losses from the drop in Brookfield Infrastructure's long position.| Royal Bank vs. Brookfield Infrastructure Partners | Royal Bank vs. Brookfield Infrastructure Partners | Royal Bank vs. iShares Canadian HYBrid | 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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