Correlation Between RBC Canadian and WaveFront All

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

By analyzing existing cross correlation between RBC Canadian Equity and WaveFront All Weather Alternative, you can compare the effects of market volatilities on RBC Canadian and WaveFront All 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 Canadian with a short position of WaveFront All. Check out your portfolio center. Please also check ongoing floating volatility patterns of RBC Canadian and WaveFront All.

Diversification Opportunities for RBC Canadian and WaveFront All

0.9

Correlation Coefficient

RBC Canadian  WaveFront All

Almost no diversification

The 3 months correlation between RBC and WaveFront is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding RBC Canadian Equity and WaveFront All Weather Alternat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WaveFront All Weather and RBC 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 RBC Canadian Equity are associated (or correlated) with WaveFront All. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WaveFront All Weather has no effect on the direction of RBC Canadian i.e., RBC Canadian and WaveFront All go up and down completely randomly.

Pair Corralation between RBC Canadian and WaveFront All

Assuming the 90 days trading horizon RBC Canadian Equity is expected to generate 0.57 times more return on investment than WaveFront All. However, RBC Canadian Equity is 1.74 times less risky than WaveFront All. It trades about 0.38 of its potential returns per unit of risk. WaveFront All Weather Alternative is currently generating about 0.19 per unit of risk. If you would invest  3,303  in RBC Canadian Equity on April 24, 2025 and sell it today you would earn a total of  301.00  from holding RBC Canadian Equity or generate 9.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.41%
Values	Daily Returns

RBC Canadian Equity  vs.  WaveFront All Weather Alternat

RBC Canadian Equity

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Canadian Equity are ranked lower than 30 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat unfluctuating basic indicators, RBC Canadian may actually be approaching a critical reversion point that can send shares even higher in August 2025.

WaveFront All Weather

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WaveFront All Weather Alternative are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of very weak basic indicators, WaveFront All may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with RBC Canadian and WaveFront All

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

The idea behind RBC Canadian Equity and WaveFront All Weather Alternative 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.