Correlation Between RBC 1 and RBC Short

Can any of the company-specific risk be diversified away by investing in both RBC 1 and RBC Short 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 1 and RBC Short into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between RBC 1 5 Year and RBC Short Term, you can compare the effects of market volatilities on RBC 1 and RBC Short 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 1 with a short position of RBC Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of RBC 1 and RBC Short.

Diversification Opportunities for RBC 1 and RBC Short

0.1

Correlation Coefficient

RBC 1  RBC Short

Average diversification

The 3 months correlation between RBC and RBC is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding RBC 1 5 Year and RBC Short Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Short Term and RBC 1 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 1 5 Year are associated (or correlated) with RBC Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBC Short Term has no effect on the direction of RBC 1 i.e., RBC 1 and RBC Short go up and down completely randomly.

Pair Corralation between RBC 1 and RBC Short

Assuming the 90 days trading horizon RBC 1 is expected to generate 1.52 times less return on investment than RBC Short. But when comparing it to its historical volatility, RBC 1 5 Year is 2.51 times less risky than RBC Short. It trades about 0.09 of its potential returns per unit of risk. RBC Short Term is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,121  in RBC Short Term on April 23, 2025 and sell it today you would earn a total of  22.00  from holding RBC Short Term or generate 1.04% return on investment over 90 days.

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

RBC 1 5 Year  vs.  RBC Short Term

RBC 1 5

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in RBC 1 5 Year are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, RBC 1 is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

RBC Short Term

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Short Term are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, RBC Short is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with RBC 1 and RBC Short

The main advantage of trading using opposite RBC 1 and RBC Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RBC 1 position performs unexpectedly, RBC Short 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 Short will offset losses from the drop in RBC Short's long position.

The idea behind RBC 1 5 Year and RBC Short Term 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.