Correlation Between RBC Short and BMO Mid
Can any of the company-specific risk be diversified away by investing in both RBC Short and BMO Mid 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 Short and BMO Mid into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RBC Short Term and BMO Mid Term IG, you can compare the effects of market volatilities on RBC Short and BMO Mid 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 Short with a short position of BMO Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of RBC Short and BMO Mid.
Diversification Opportunities for RBC Short and BMO Mid
Very poor diversification
The 3 months correlation between RBC and BMO is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding RBC Short Term and BMO Mid Term IG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Mid Term and RBC Short 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 Short Term are associated (or correlated) with BMO Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Mid Term has no effect on the direction of RBC Short i.e., RBC Short and BMO Mid go up and down completely randomly.
Pair Corralation between RBC Short and BMO Mid
Assuming the 90 days trading horizon RBC Short Term is expected to generate 0.71 times more return on investment than BMO Mid. However, RBC Short Term is 1.41 times less risky than BMO Mid. It trades about 0.2 of its potential returns per unit of risk. BMO Mid Term IG is currently generating about 0.06 per unit of risk. If you would invest 2,202 in RBC Short Term on November 3, 2024 and sell it today you would earn a total of 32.00 from holding RBC Short Term or generate 1.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
RBC Short Term vs. BMO Mid Term IG
Performance |
| Timeline |
| RBC Short Term |
| BMO Mid Term |
RBC Short and BMO Mid Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RBC Short and BMO Mid
The main advantage of trading using opposite RBC Short and BMO Mid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RBC Short position performs unexpectedly, BMO Mid 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 Mid will offset losses from the drop in BMO Mid's long position.| RBC Short vs. RBC Target 2029 | RBC Short vs. RBC Quant Dividend | RBC Short vs. RBC Quant EAFE | RBC Short vs. RBC Quant European |
| BMO Mid vs. BMO Mid Term IG | BMO Mid vs. BMO Mid Corporate | BMO Mid vs. CI Canadian Banks | BMO Mid vs. BMO Long Corporate |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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