Correlation Between Royal Bank and Stantec
Can any of the company-specific risk be diversified away by investing in both Royal Bank and Stantec 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 Stantec 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 Stantec, you can compare the effects of market volatilities on Royal Bank and Stantec 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 Stantec. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Bank and Stantec.
Diversification Opportunities for Royal Bank and Stantec
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Royal and Stantec is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Royal Bank of and Stantec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stantec 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 Stantec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stantec has no effect on the direction of Royal Bank i.e., Royal Bank and Stantec go up and down completely randomly.
Pair Corralation between Royal Bank and Stantec
Assuming the 90 days horizon Royal Bank of is expected to generate 0.56 times more return on investment than Stantec. However, Royal Bank of is 1.77 times less risky than Stantec. It trades about 0.27 of its potential returns per unit of risk. Stantec is currently generating about -0.01 per unit of risk. If you would invest 17,082 in Royal Bank of on November 3, 2024 and sell it today you would earn a total of 785.00 from holding Royal Bank of or generate 4.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Royal Bank of vs. Stantec
Performance |
| Timeline |
| Royal Bank |
| Stantec |
Royal Bank and Stantec Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Royal Bank and Stantec
The main advantage of trading using opposite Royal Bank and Stantec positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royal Bank position performs unexpectedly, Stantec 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 Stantec will offset losses from the drop in Stantec'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 |
| Stantec vs. Toromont Industries | Stantec vs. WSP Global | Stantec vs. Ritchie Bros Auctioneers | Stantec vs. Stella Jones |
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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