Correlation Between RBC Target and RBC Quant

Can any of the company-specific risk be diversified away by investing in both RBC Target 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 Target 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 Target 2029 and RBC Quant Dividend, you can compare the effects of market volatilities on RBC Target 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 Target with a short position of RBC Quant. Check out your portfolio center. Please also check ongoing floating volatility patterns of RBC Target and RBC Quant.

Diversification Opportunities for RBC Target and RBC Quant

0.86

Correlation Coefficient

RBC Target  RBC Quant

Very poor diversification

The 3 months correlation between RBC and RBC is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding RBC Target 2029 and RBC Quant Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Quant Dividend and RBC Target 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 Target 2029 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 Dividend has no effect on the direction of RBC Target i.e., RBC Target and RBC Quant go up and down completely randomly.

Pair Corralation between RBC Target and RBC Quant

Assuming the 90 days trading horizon RBC Target is expected to generate 16.87 times less return on investment than RBC Quant. But when comparing it to its historical volatility, RBC Target 2029 is 5.28 times less risky than RBC Quant. It trades about 0.09 of its potential returns per unit of risk. RBC Quant Dividend is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  2,136  in RBC Quant Dividend on April 21, 2025 and sell it today you would earn a total of  393.00  from holding RBC Quant Dividend or generate 18.4% return on investment over 90 days.

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

RBC Target 2029  vs.  RBC Quant Dividend

RBC Target 2029

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Target 2029 are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, RBC Target is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

RBC Quant Dividend

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Quant Dividend are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, RBC Quant displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with RBC Target and RBC Quant

The main advantage of trading using opposite RBC Target and RBC Quant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RBC Target 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 Target 2029 and RBC Quant Dividend 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.

Check out your portfolio center.

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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.