Correlation Between Rbc Small and Rbc China

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

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

Diversification Opportunities for Rbc Small and Rbc China

0.23

Correlation Coefficient

Rbc Small  Rbc China

Modest diversification

The 3 months correlation between Rbc and Rbc is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Rbc Small Cap 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 Rbc Small 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 Small Cap 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 Rbc Small i.e., Rbc Small and Rbc China go up and down completely randomly.

Pair Corralation between Rbc Small and Rbc China

Assuming the 90 days horizon Rbc Small Cap is expected to generate 0.69 times more return on investment than Rbc China. However, Rbc Small Cap is 1.44 times less risky than Rbc China. It trades about 0.14 of its potential returns per unit of risk. Rbc China Equity is currently generating about -0.08 per unit of risk. If you would invest  1,593  in Rbc Small Cap on August 13, 2024 and sell it today you would earn a total of  77.00  from holding Rbc Small Cap or generate 4.83% return on investment over 90 days.

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

Rbc Small Cap  vs.  Rbc China Equity

Rbc Small Cap

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rbc Small Cap are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Rbc Small may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Rbc China Equity

Risk-Adjusted Performance

7 of 100

OK

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

Pair Trading with Rbc Small and Rbc China

The main advantage of trading using opposite Rbc Small and Rbc China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rbc Small 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.

The idea behind Rbc Small Cap and Rbc China Equity 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.