Correlation Between RBC Quant and BMO Europe
Can any of the company-specific risk be diversified away by investing in both RBC Quant and BMO Europe 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 Europe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RBC Quant Emerging and BMO Europe High, you can compare the effects of market volatilities on RBC Quant and BMO Europe 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 Europe. Check out your portfolio center. Please also check ongoing floating volatility patterns of RBC Quant and BMO Europe.
Diversification Opportunities for RBC Quant and BMO Europe
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between RBC and BMO is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding RBC Quant Emerging and BMO Europe High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Europe High 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 Emerging are associated (or correlated) with BMO Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Europe High has no effect on the direction of RBC Quant i.e., RBC Quant and BMO Europe go up and down completely randomly.
Pair Corralation between RBC Quant and BMO Europe
Assuming the 90 days trading horizon RBC Quant Emerging is expected to under-perform the BMO Europe. In addition to that, RBC Quant is 1.17 times more volatile than BMO Europe High. It trades about -0.06 of its total potential returns per unit of risk. BMO Europe High is currently generating about 0.03 per unit of volatility. If you would invest 2,013 in BMO Europe High on September 5, 2024 and sell it today you would earn a total of 7.00 from holding BMO Europe High or generate 0.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
RBC Quant Emerging vs. BMO Europe High
Performance |
| Timeline |
| RBC Quant Emerging |
| BMO Europe High |
RBC Quant and BMO Europe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RBC Quant and BMO Europe
The main advantage of trading using opposite RBC Quant and BMO Europe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RBC Quant position performs unexpectedly, BMO Europe 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 Europe will offset losses from the drop in BMO Europe's long position.| RBC Quant vs. RBC Quant European | RBC Quant vs. RBC Quant Canadian | RBC Quant vs. RBC Quant EAFE | RBC Quant vs. RBC Quant Dividend |
| BMO Europe vs. RBC Quant EAFE | BMO Europe vs. RBC Quant Dividend | BMO Europe vs. RBC Quant Emerging | BMO Europe vs. RBC Quant Canadian |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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