Correlation Between IShares Core and RBC Quant
Can any of the company-specific risk be diversified away by investing in both IShares Core and RBC Quant 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 Quant into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Core MSCI and RBC Quant EAFE, you can compare the effects of market volatilities on IShares Core and RBC Quant 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 Quant. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and RBC Quant.
Diversification Opportunities for IShares Core and RBC Quant
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and RBC is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core MSCI and RBC Quant EAFE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Quant EAFE 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 MSCI are associated (or correlated) with RBC Quant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBC Quant EAFE has no effect on the direction of IShares Core i.e., IShares Core and RBC Quant go up and down completely randomly.
Pair Corralation between IShares Core and RBC Quant
Assuming the 90 days trading horizon IShares Core is expected to generate 1.19 times less return on investment than RBC Quant. But when comparing it to its historical volatility, iShares Core MSCI is 1.05 times less risky than RBC Quant. It trades about 0.07 of its potential returns per unit of risk. RBC Quant EAFE is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 2,545 in RBC Quant EAFE on August 25, 2024 and sell it today you would earn a total of 314.00 from holding RBC Quant EAFE or generate 12.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Core MSCI vs. RBC Quant EAFE
Performance |
| Timeline |
| iShares Core MSCI |
| RBC Quant EAFE |
IShares Core and RBC Quant Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Core and RBC Quant
The main advantage of trading using opposite IShares Core and RBC Quant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core position performs unexpectedly, RBC Quant 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 Quant will offset losses from the drop in RBC Quant's long position.| IShares Core vs. Vanguard FTSE Developed | IShares Core vs. iShares MSCI EAFE | IShares Core vs. iShares Core MSCI | IShares Core vs. BMO MSCI EAFE |
| RBC Quant vs. iShares Core MSCI | RBC Quant vs. Vanguard FTSE Developed | RBC Quant vs. iShares MSCI EAFE | RBC Quant vs. iShares Core MSCI |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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