Correlation Between Royal Bank and Canadian Utilities
Can any of the company-specific risk be diversified away by investing in both Royal Bank and Canadian Utilities 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 Canadian Utilities 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 Canadian Utilities Ltd, you can compare the effects of market volatilities on Royal Bank and Canadian Utilities 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 Canadian Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Bank and Canadian Utilities.
Diversification Opportunities for Royal Bank and Canadian Utilities
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Royal and Canadian is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Royal Bank of and Canadian Utilities Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Utilities 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 Canadian Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Utilities has no effect on the direction of Royal Bank i.e., Royal Bank and Canadian Utilities go up and down completely randomly.
Pair Corralation between Royal Bank and Canadian Utilities
Assuming the 90 days trading horizon Royal Bank of is expected to under-perform the Canadian Utilities. But the preferred stock apears to be less risky and, when comparing its historical volatility, Royal Bank of is 1.59 times less risky than Canadian Utilities. The preferred stock trades about -0.03 of its potential returns per unit of risk. The Canadian Utilities Ltd is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 2,210 in Canadian Utilities Ltd on October 9, 2024 and sell it today you would earn a total of 30.00 from holding Canadian Utilities Ltd or generate 1.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Royal Bank of vs. Canadian Utilities Ltd
Performance |
| Timeline |
| Royal Bank |
| Canadian Utilities |
Royal Bank and Canadian Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Royal Bank and Canadian Utilities
The main advantage of trading using opposite Royal Bank and Canadian Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royal Bank position performs unexpectedly, Canadian Utilities 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 Canadian Utilities will offset losses from the drop in Canadian Utilities' long position.| Royal Bank vs. Nova Leap Health | Royal Bank vs. Magna Mining | Royal Bank vs. Jamieson Wellness | Royal Bank vs. Element Fleet Management |
| Canadian Utilities vs. Constellation Software | Canadian Utilities vs. Canlan Ice Sports | Canadian Utilities vs. Evertz Technologies Limited | Canadian Utilities vs. Questor Technology |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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