Correlation Between BMO Equal and RBC Banks
Can any of the company-specific risk be diversified away by investing in both BMO Equal and RBC Banks 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 BMO Equal and RBC Banks into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Equal Weight and RBC Banks Yield, you can compare the effects of market volatilities on BMO Equal and RBC Banks 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 BMO Equal with a short position of RBC Banks. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Equal and RBC Banks.
Diversification Opportunities for BMO Equal and RBC Banks
Very poor diversification
The 3 months correlation between BMO and RBC is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding BMO Equal Weight and RBC Banks Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Banks Yield and BMO Equal 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 BMO Equal Weight are associated (or correlated) with RBC Banks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBC Banks Yield has no effect on the direction of BMO Equal i.e., BMO Equal and RBC Banks go up and down completely randomly.
Pair Corralation between BMO Equal and RBC Banks
Assuming the 90 days trading horizon BMO Equal Weight is expected to generate 0.92 times more return on investment than RBC Banks. However, BMO Equal Weight is 1.09 times less risky than RBC Banks. It trades about 0.04 of its potential returns per unit of risk. RBC Banks Yield is currently generating about 0.03 per unit of risk. If you would invest 2,819 in BMO Equal Weight on November 27, 2024 and sell it today you would earn a total of 958.00 from holding BMO Equal Weight or generate 33.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Equal Weight vs. RBC Banks Yield
Performance |
| Timeline |
| BMO Equal Weight |
| RBC Banks Yield |
BMO Equal and RBC Banks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Equal and RBC Banks
The main advantage of trading using opposite BMO Equal and RBC Banks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Equal position performs unexpectedly, RBC Banks 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 RBC Banks will offset losses from the drop in RBC Banks' long position.| BMO Equal vs. BMO Short Term Bond | BMO Equal vs. BMO Canadian Bank | BMO Equal vs. BMO Aggregate Bond | BMO Equal vs. BMO Balanced ETF |
| RBC Banks vs. RBC Banks Yield | RBC Banks vs. RBC Quant Dividend | RBC Banks vs. RBC Quant European | RBC Banks vs. RBC Short Term |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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