Correlation Between Rbc Funds and Western Asset

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

By analyzing existing cross correlation between Rbc Funds Trust and Western Asset Municipal, you can compare the effects of market volatilities on Rbc Funds and Western Asset 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 Funds with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rbc Funds and Western Asset.

Diversification Opportunities for Rbc Funds and Western Asset

-0.32

Correlation Coefficient

Rbc Funds  Western Asset

Very good diversification

The 3 months correlation between Rbc and Western is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Rbc Funds Trust and Western Asset Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Municipal and Rbc Funds 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 Funds Trust are associated (or correlated) with Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Municipal has no effect on the direction of Rbc Funds i.e., Rbc Funds and Western Asset go up and down completely randomly.

Pair Corralation between Rbc Funds and Western Asset

Assuming the 90 days horizon Rbc Funds Trust is expected to generate 0.45 times more return on investment than Western Asset. However, Rbc Funds Trust is 2.2 times less risky than Western Asset. It trades about 0.31 of its potential returns per unit of risk. Western Asset Municipal is currently generating about 0.01 per unit of risk. If you would invest  896.00  in Rbc Funds Trust on January 26, 2024 and sell it today you would earn a total of  90.00  from holding Rbc Funds Trust or generate 10.04% return on investment over 90 days.

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

Rbc Funds Trust  vs.  Western Asset Municipal

Rbc Funds Trust

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rbc Funds Trust are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Rbc Funds is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Western Asset Municipal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Asset Municipal has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Western Asset is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Rbc Funds and Western Asset

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

The idea behind Rbc Funds Trust and Western Asset Municipal 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.