Correlation Between RBC Quant and BMO Low
Can any of the company-specific risk be diversified away by investing in both RBC Quant and BMO Low 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 Quant and BMO Low into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RBC Quant EAFE and BMO Low Volatility, you can compare the effects of market volatilities on RBC Quant and BMO Low 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 Quant with a short position of BMO Low. Check out your portfolio center. Please also check ongoing floating volatility patterns of RBC Quant and BMO Low.
Diversification Opportunities for RBC Quant and BMO Low
Poor diversification
The 3 months correlation between RBC and BMO is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding RBC Quant EAFE and BMO Low Volatility in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Low Volatility and RBC Quant 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 Quant EAFE are associated (or correlated) with BMO Low. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Low Volatility has no effect on the direction of RBC Quant i.e., RBC Quant and BMO Low go up and down completely randomly.
Pair Corralation between RBC Quant and BMO Low
Assuming the 90 days trading horizon RBC Quant EAFE is expected to generate 0.94 times more return on investment than BMO Low. However, RBC Quant EAFE is 1.07 times less risky than BMO Low. It trades about 0.09 of its potential returns per unit of risk. BMO Low Volatility is currently generating about 0.04 per unit of risk. If you would invest 2,040 in RBC Quant EAFE on September 5, 2024 and sell it today you would earn a total of 634.00 from holding RBC Quant EAFE or generate 31.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
RBC Quant EAFE vs. BMO Low Volatility
Performance |
| Timeline |
| RBC Quant EAFE |
| BMO Low Volatility |
RBC Quant and BMO Low Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RBC Quant and BMO Low
The main advantage of trading using opposite RBC Quant and BMO Low positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RBC Quant position performs unexpectedly, BMO Low 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 BMO Low will offset losses from the drop in BMO Low's long position.| RBC Quant vs. RBC Quant Dividend | RBC Quant vs. RBC Quant Canadian | RBC Quant vs. RBC Quant European | RBC Quant vs. RBC Quant Emerging |
| BMO Low vs. RBC Quant European | BMO Low vs. RBC Quant Canadian | BMO Low vs. RBC Quant EAFE | BMO Low vs. RBC Quant Dividend |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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