Correlation Between Royal Bank and Exco Technologies
Can any of the company-specific risk be diversified away by investing in both Royal Bank and Exco Technologies 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 Exco Technologies 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 Exco Technologies Limited, you can compare the effects of market volatilities on Royal Bank and Exco Technologies 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 Exco Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Bank and Exco Technologies.
Diversification Opportunities for Royal Bank and Exco Technologies
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Royal and Exco is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Royal Bank of and Exco Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exco Technologies 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 Exco Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exco Technologies has no effect on the direction of Royal Bank i.e., Royal Bank and Exco Technologies go up and down completely randomly.
Pair Corralation between Royal Bank and Exco Technologies
Assuming the 90 days horizon Royal Bank of is expected to generate 0.75 times more return on investment than Exco Technologies. However, Royal Bank of is 1.34 times less risky than Exco Technologies. It trades about 0.13 of its potential returns per unit of risk. Exco Technologies Limited is currently generating about -0.07 per unit of risk. If you would invest 17,184 in Royal Bank of on August 31, 2024 and sell it today you would earn a total of 396.00 from holding Royal Bank of or generate 2.3% 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. Exco Technologies Limited
Performance |
| Timeline |
| Royal Bank |
| Exco Technologies |
Royal Bank and Exco Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Royal Bank and Exco Technologies
The main advantage of trading using opposite Royal Bank and Exco Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royal Bank position performs unexpectedly, Exco Technologies 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 Exco Technologies will offset losses from the drop in Exco Technologies' 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 |
| Exco Technologies vs. Berkshire Hathaway CDR | Exco Technologies vs. JPMorgan Chase Co | Exco Technologies vs. Bank of America | Exco Technologies vs. Alphabet Inc CDR |
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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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