Correlation Between IShares Canadian and RBC 1
Can any of the company-specific risk be diversified away by investing in both IShares Canadian and RBC 1 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 Canadian and RBC 1 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Canadian Real and RBC 1 5 Year, you can compare the effects of market volatilities on IShares Canadian and RBC 1 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 Canadian with a short position of RBC 1. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Canadian and RBC 1.
Diversification Opportunities for IShares Canadian and RBC 1
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and RBC is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding iShares Canadian Real and RBC 1 5 Year in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC 1 5 and IShares Canadian 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 Canadian Real are associated (or correlated) with RBC 1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBC 1 5 has no effect on the direction of IShares Canadian i.e., IShares Canadian and RBC 1 go up and down completely randomly.
Pair Corralation between IShares Canadian and RBC 1
Assuming the 90 days trading horizon iShares Canadian Real is expected to under-perform the RBC 1. In addition to that, IShares Canadian is 3.24 times more volatile than RBC 1 5 Year. It trades about -0.13 of its total potential returns per unit of risk. RBC 1 5 Year is currently generating about 0.11 per unit of volatility. If you would invest 1,865 in RBC 1 5 Year on October 7, 2024 and sell it today you would earn a total of 7.00 from holding RBC 1 5 Year or generate 0.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Canadian Real vs. RBC 1 5 Year
Performance |
| Timeline |
| iShares Canadian Real |
| RBC 1 5 |
IShares Canadian and RBC 1 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Canadian and RBC 1
The main advantage of trading using opposite IShares Canadian and RBC 1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Canadian position performs unexpectedly, RBC 1 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 1 will offset losses from the drop in RBC 1's long position.| IShares Canadian vs. iShares Canadian Short | IShares Canadian vs. iShares Canadian Government | IShares Canadian vs. iShares Core Canadian | IShares Canadian vs. iShares Core Canadian |
| RBC 1 vs. RBC Quant EAFE | RBC 1 vs. RBC Quant Canadian | RBC 1 vs. RBC Quant Dividend | RBC 1 vs. RBC Quant European |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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