Correlation Between IShares Core and RBC PHN
Can any of the company-specific risk be diversified away by investing in both IShares Core and RBC PHN 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 IShares Core and RBC PHN into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Core Canadian and RBC PHN Short, you can compare the effects of market volatilities on IShares Core and RBC PHN 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 IShares Core with a short position of RBC PHN. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and RBC PHN.
Diversification Opportunities for IShares Core and RBC PHN
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and RBC is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core Canadian and RBC PHN Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC PHN Short and IShares Core 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 iShares Core Canadian are associated (or correlated) with RBC PHN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBC PHN Short has no effect on the direction of IShares Core i.e., IShares Core and RBC PHN go up and down completely randomly.
Pair Corralation between IShares Core and RBC PHN
Assuming the 90 days trading horizon iShares Core Canadian is expected to generate 2.03 times more return on investment than RBC PHN. However, IShares Core is 2.03 times more volatile than RBC PHN Short. It trades about 0.08 of its potential returns per unit of risk. RBC PHN Short is currently generating about 0.1 per unit of risk. If you would invest 1,766 in iShares Core Canadian on September 13, 2024 and sell it today you would earn a total of 265.00 from holding iShares Core Canadian or generate 15.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Core Canadian vs. RBC PHN Short
Performance |
| Timeline |
| iShares Core Canadian |
| RBC PHN Short |
IShares Core and RBC PHN Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Core and RBC PHN
The main advantage of trading using opposite IShares Core and RBC PHN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core position performs unexpectedly, RBC PHN 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 PHN will offset losses from the drop in RBC PHN's long position.| IShares Core vs. BMO Mid Corporate | IShares Core vs. Global X Active | IShares Core vs. iShares 1 10Yr Laddered | IShares Core vs. RBC Target 2026 |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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