Correlation Between Royal Bank and Barrick Gold
Can any of the company-specific risk be diversified away by investing in both Royal Bank and Barrick Gold 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 Royal Bank and Barrick Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Royal Bank of and Barrick Gold Corp, you can compare the effects of market volatilities on Royal Bank and Barrick Gold 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 Royal Bank with a short position of Barrick Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Bank and Barrick Gold.
Diversification Opportunities for Royal Bank and Barrick Gold
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Royal and Barrick is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Royal Bank of and Barrick Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barrick Gold Corp and Royal Bank 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 Royal Bank of are associated (or correlated) with Barrick Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barrick Gold Corp has no effect on the direction of Royal Bank i.e., Royal Bank and Barrick Gold go up and down completely randomly.
Pair Corralation between Royal Bank and Barrick Gold
Assuming the 90 days trading horizon Royal Bank of is expected to generate 0.39 times more return on investment than Barrick Gold. However, Royal Bank of is 2.59 times less risky than Barrick Gold. It trades about 0.4 of its potential returns per unit of risk. Barrick Gold Corp is currently generating about -0.13 per unit of risk. If you would invest 2,286 in Royal Bank of on February 7, 2024 and sell it today you would earn a total of 163.00 from holding Royal Bank of or generate 7.13% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Royal Bank of vs. Barrick Gold Corp
Performance |
Timeline |
Royal Bank |
Barrick Gold Corp |
Royal Bank and Barrick Gold Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Royal Bank and Barrick Gold
The main advantage of trading using opposite Royal Bank and Barrick Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royal Bank position performs unexpectedly, Barrick Gold 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 Barrick Gold will offset losses from the drop in Barrick Gold's long position.Royal Bank vs. American Lithium Corp | Royal Bank vs. Enerev5 Metals | Royal Bank vs. Lion One Metals | Royal Bank vs. CIBC Active Investment |
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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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