Correlation Between BMO Mid and RBC Short
Can any of the company-specific risk be diversified away by investing in both BMO Mid and RBC Short 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 Mid and RBC Short into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Mid Term IG and RBC Short Term, you can compare the effects of market volatilities on BMO Mid and RBC Short 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 Mid with a short position of RBC Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Mid and RBC Short.
Diversification Opportunities for BMO Mid and RBC Short
Poor diversification
The 3 months correlation between BMO and RBC is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding BMO Mid Term IG and RBC Short Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Short Term and BMO Mid 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 Mid Term IG are associated (or correlated) with RBC Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBC Short Term has no effect on the direction of BMO Mid i.e., BMO Mid and RBC Short go up and down completely randomly.
Pair Corralation between BMO Mid and RBC Short
Assuming the 90 days trading horizon BMO Mid Term IG is expected to generate 1.24 times more return on investment than RBC Short. However, BMO Mid is 1.24 times more volatile than RBC Short Term. It trades about 0.06 of its potential returns per unit of risk. RBC Short Term is currently generating about 0.07 per unit of risk. If you would invest 1,599 in BMO Mid Term IG on August 29, 2024 and sell it today you would earn a total of 233.00 from holding BMO Mid Term IG or generate 14.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Mid Term IG vs. RBC Short Term
Performance |
| Timeline |
| BMO Mid Term |
| RBC Short Term |
BMO Mid and RBC Short Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Mid and RBC Short
The main advantage of trading using opposite BMO Mid and RBC Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Mid position performs unexpectedly, RBC Short 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 Short will offset losses from the drop in RBC Short's long position.| BMO Mid vs. Mackenzie High Yield | BMO Mid vs. Mackenzie Core Plus | BMO Mid vs. Mackenzie Canadian Aggregate | BMO Mid vs. Mackenzie Core Plus |
| RBC Short vs. Mackenzie High Yield | RBC Short vs. Mackenzie Core Plus | RBC Short vs. Mackenzie Canadian Aggregate | RBC Short vs. Mackenzie Core Plus |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
Other Complementary Tools
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity |