Correlation Between RBC Canadian and RBC Quant

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

By analyzing existing cross correlation between RBC Canadian Preferred and RBC Quant EAFE, you can compare the effects of market volatilities on RBC Canadian and RBC Quant 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 RBC Quant. Check out your portfolio center. Please also check ongoing floating volatility patterns of RBC Canadian and RBC Quant.

Diversification Opportunities for RBC Canadian and RBC Quant

0.93

Correlation Coefficient

RBC Canadian  RBC Quant

Almost no diversification

The 3 months correlation between RBC and RBC is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding RBC Canadian Preferred and RBC Quant EAFE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Quant EAFE 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 Preferred are associated (or correlated) with RBC Quant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBC Quant EAFE has no effect on the direction of RBC Canadian i.e., RBC Canadian and RBC Quant go up and down completely randomly.

Pair Corralation between RBC Canadian and RBC Quant

Assuming the 90 days trading horizon RBC Canadian Preferred is expected to generate 0.29 times more return on investment than RBC Quant. However, RBC Canadian Preferred is 3.47 times less risky than RBC Quant. It trades about 0.76 of its potential returns per unit of risk. RBC Quant EAFE is currently generating about 0.15 per unit of risk. If you would invest  2,078  in RBC Canadian Preferred on April 24, 2025 and sell it today you would earn a total of  266.00  from holding RBC Canadian Preferred or generate 12.8% return on investment over 90 days.

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

RBC Canadian Preferred  vs.  RBC Quant EAFE

RBC Canadian Preferred

Risk-Adjusted Performance

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Canadian Preferred are ranked lower than 59 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, RBC Canadian may actually be approaching a critical reversion point that can send shares even higher in August 2025.

RBC Quant EAFE

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Quant EAFE are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, RBC Quant may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with RBC Canadian and RBC Quant

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

The idea behind RBC Canadian Preferred and RBC Quant EAFE 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.