Correlation Between Rbc Bluebay and Rbc Smid

Can any of the company-specific risk be diversified away by investing in both Rbc Bluebay and Rbc Smid 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 Rbc Bluebay and Rbc Smid into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Rbc Bluebay Absolute and Rbc Smid Cap, you can compare the effects of market volatilities on Rbc Bluebay and Rbc Smid 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 Rbc Bluebay with a short position of Rbc Smid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rbc Bluebay and Rbc Smid.

Diversification Opportunities for Rbc Bluebay and Rbc Smid

0.53

Correlation Coefficient

Rbc Bluebay  Rbc Smid

Very weak diversification

The 3 months correlation between Rbc and Rbc is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Rbc Bluebay Absolute and Rbc Smid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rbc Smid Cap and Rbc Bluebay 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 Rbc Bluebay Absolute are associated (or correlated) with Rbc Smid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rbc Smid Cap has no effect on the direction of Rbc Bluebay i.e., Rbc Bluebay and Rbc Smid go up and down completely randomly.

Pair Corralation between Rbc Bluebay and Rbc Smid

Assuming the 90 days horizon Rbc Bluebay Absolute is expected to under-perform the Rbc Smid. In addition to that, Rbc Bluebay is 2.09 times more volatile than Rbc Smid Cap. It trades about -0.08 of its total potential returns per unit of risk. Rbc Smid Cap is currently generating about 0.15 per unit of volatility. If you would invest  1,685  in Rbc Smid Cap on August 13, 2024 and sell it today you would earn a total of  59.00  from holding Rbc Smid Cap or generate 3.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Rbc Bluebay Absolute  vs.  Rbc Smid Cap

Rbc Bluebay Absolute

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rbc Bluebay Absolute are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Rbc Bluebay showed solid returns over the last few months and may actually be approaching a breakup point.

Rbc Smid Cap

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rbc Smid Cap are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Rbc Smid may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Rbc Bluebay and Rbc Smid

The main advantage of trading using opposite Rbc Bluebay and Rbc Smid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rbc Bluebay position performs unexpectedly, Rbc Smid 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 Smid will offset losses from the drop in Rbc Smid's long position.

The idea behind Rbc Bluebay Absolute and Rbc Smid Cap pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.