Correlation Between California Bond and Rbc China
Can any of the company-specific risk be diversified away by investing in both California Bond and Rbc China 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 California Bond and Rbc China into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between California Bond Fund and Rbc China Equity, you can compare the effects of market volatilities on California Bond and Rbc China 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 California Bond with a short position of Rbc China. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Bond and Rbc China.
Diversification Opportunities for California Bond and Rbc China
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between California and Rbc is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding California Bond Fund and Rbc China Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rbc China Equity and California Bond 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 California Bond Fund are associated (or correlated) with Rbc China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rbc China Equity has no effect on the direction of California Bond i.e., California Bond and Rbc China go up and down completely randomly.
Pair Corralation between California Bond and Rbc China
Assuming the 90 days horizon California Bond Fund is expected to generate 0.36 times more return on investment than Rbc China. However, California Bond Fund is 2.81 times less risky than Rbc China. It trades about -0.47 of its potential returns per unit of risk. Rbc China Equity is currently generating about -0.43 per unit of risk. If you would invest 1,046 in California Bond Fund on October 16, 2024 and sell it today you would lose (28.00) from holding California Bond Fund or give up 2.68% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
California Bond Fund vs. Rbc China Equity
Performance |
| Timeline |
| California Bond |
| Rbc China Equity |
California Bond and Rbc China Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with California Bond and Rbc China
The main advantage of trading using opposite California Bond and Rbc China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California Bond position performs unexpectedly, Rbc China 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 Rbc China will offset losses from the drop in Rbc China's long position.| California Bond vs. Multisector Bond Sma | California Bond vs. Georgia Tax Free Bond | California Bond vs. Pace Strategic Fixed | California Bond vs. Enhanced Fixed Income |
| Rbc China vs. Virtus High Yield | Rbc China vs. Fidelity Capital Income | Rbc China vs. Siit High Yield | Rbc China vs. Barings High Yield |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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