Correlation Between Royal Bank and Enbridge
Can any of the company-specific risk be diversified away by investing in both Royal Bank and Enbridge 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 Enbridge 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 Enbridge, you can compare the effects of market volatilities on Royal Bank and Enbridge 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 Enbridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Bank and Enbridge.
Diversification Opportunities for Royal Bank and Enbridge
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Royal and Enbridge is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Royal Bank of and Enbridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enbridge 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 Enbridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enbridge has no effect on the direction of Royal Bank i.e., Royal Bank and Enbridge go up and down completely randomly.
Pair Corralation between Royal Bank and Enbridge
Assuming the 90 days horizon Royal Bank of is expected to generate 0.97 times more return on investment than Enbridge. However, Royal Bank of is 1.03 times less risky than Enbridge. It trades about 0.09 of its potential returns per unit of risk. Enbridge is currently generating about 0.06 per unit of risk. If you would invest 12,036 in Royal Bank of on August 28, 2024 and sell it today you would earn a total of 5,430 from holding Royal Bank of or generate 45.11% 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. Enbridge
Performance |
| Timeline |
| Royal Bank |
| Enbridge |
Royal Bank and Enbridge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Royal Bank and Enbridge
The main advantage of trading using opposite Royal Bank and Enbridge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royal Bank position performs unexpectedly, Enbridge 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 Enbridge will offset losses from the drop in Enbridge's long position.| Royal Bank vs. DelphX Capital Markets | Royal Bank vs. Citadel Income | Royal Bank vs. iShares Canadian HYBrid | Royal Bank vs. Altagas Cum Red |
| Enbridge vs. Suncor Energy | Enbridge vs. Toronto Dominion Bank | Enbridge vs. Bank of Nova | Enbridge vs. BCE Inc |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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