Correlation Between Royal Bank and Intact Financial
Can any of the company-specific risk be diversified away by investing in both Royal Bank and Intact Financial 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 Intact Financial 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 Intact Financial, you can compare the effects of market volatilities on Royal Bank and Intact Financial 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 Intact Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Bank and Intact Financial.
Diversification Opportunities for Royal Bank and Intact Financial
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Royal and Intact is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Royal Bank of and Intact Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intact Financial 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 Intact Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intact Financial has no effect on the direction of Royal Bank i.e., Royal Bank and Intact Financial go up and down completely randomly.
Pair Corralation between Royal Bank and Intact Financial
Assuming the 90 days horizon Royal Bank is expected to generate 1.76 times less return on investment than Intact Financial. But when comparing it to its historical volatility, Royal Bank of is 1.05 times less risky than Intact Financial. It trades about 0.09 of its potential returns per unit of risk. Intact Financial is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 26,470 in Intact Financial on August 24, 2024 and sell it today you would earn a total of 801.00 from holding Intact Financial or generate 3.03% 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. Intact Financial
Performance |
| Timeline |
| Royal Bank |
| Intact Financial |
Royal Bank and Intact Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Royal Bank and Intact Financial
The main advantage of trading using opposite Royal Bank and Intact Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royal Bank position performs unexpectedly, Intact Financial 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 Intact Financial will offset losses from the drop in Intact Financial's long position.| Royal Bank vs. Toronto Dominion Bank | Royal Bank vs. Bank of Nova | Royal Bank vs. Bank of Montreal | Royal Bank vs. Canadian Imperial Bank |
| Intact Financial vs. Waste Connections | Intact Financial vs. CCL Industries | Intact Financial vs. iShares Canadian HYBrid | Intact Financial vs. Solar Alliance Energy |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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