Correlation Between RBC Banks and Brompton European

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

By analyzing existing cross correlation between RBC Banks Yield and Brompton European Dividend, you can compare the effects of market volatilities on RBC Banks and Brompton European 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 Banks with a short position of Brompton European. Check out your portfolio center. Please also check ongoing floating volatility patterns of RBC Banks and Brompton European.

Diversification Opportunities for RBC Banks and Brompton European

0.79

Correlation Coefficient

RBC Banks  Brompton European

Poor diversification

The 3 months correlation between RBC and Brompton is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding RBC Banks Yield and Brompton European Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brompton European and RBC Banks 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 Banks Yield are associated (or correlated) with Brompton European. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brompton European has no effect on the direction of RBC Banks i.e., RBC Banks and Brompton European go up and down completely randomly.

Pair Corralation between RBC Banks and Brompton European

Assuming the 90 days trading horizon RBC Banks Yield is expected to generate 2.08 times more return on investment than Brompton European. However, RBC Banks is 2.08 times more volatile than Brompton European Dividend. It trades about 0.23 of its potential returns per unit of risk. Brompton European Dividend is currently generating about 0.23 per unit of risk. If you would invest  1,682  in RBC Banks Yield on April 20, 2025 and sell it today you would earn a total of  446.00  from holding RBC Banks Yield or generate 26.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

RBC Banks Yield  vs.  Brompton European Dividend

RBC Banks Yield

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Banks Yield are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, RBC Banks displayed solid returns over the last few months and may actually be approaching a breakup point.

Brompton European

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Brompton European Dividend are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Brompton European may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with RBC Banks and Brompton European

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

The idea behind RBC Banks Yield and Brompton European 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.

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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.