Correlation Between BMO Aggregate and RBC Target
Can any of the company-specific risk be diversified away by investing in both BMO Aggregate and RBC Target 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 Aggregate and RBC Target into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Aggregate Bond and RBC Target 2026, you can compare the effects of market volatilities on BMO Aggregate and RBC Target 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 Aggregate with a short position of RBC Target. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Aggregate and RBC Target.
Diversification Opportunities for BMO Aggregate and RBC Target
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between BMO and RBC is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding BMO Aggregate Bond and RBC Target 2026 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Target 2026 and BMO Aggregate 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 Aggregate Bond are associated (or correlated) with RBC Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBC Target 2026 has no effect on the direction of BMO Aggregate i.e., BMO Aggregate and RBC Target go up and down completely randomly.
Pair Corralation between BMO Aggregate and RBC Target
Assuming the 90 days trading horizon BMO Aggregate Bond is expected to under-perform the RBC Target. In addition to that, BMO Aggregate is 1.52 times more volatile than RBC Target 2026. It trades about -0.11 of its total potential returns per unit of risk. RBC Target 2026 is currently generating about 0.1 per unit of volatility. If you would invest 1,859 in RBC Target 2026 on August 27, 2024 and sell it today you would earn a total of 4.00 from holding RBC Target 2026 or generate 0.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Aggregate Bond vs. RBC Target 2026
Performance |
| Timeline |
| BMO Aggregate Bond |
| RBC Target 2026 |
BMO Aggregate and RBC Target Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Aggregate and RBC Target
The main advantage of trading using opposite BMO Aggregate and RBC Target positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Aggregate position performs unexpectedly, RBC Target 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 Target will offset losses from the drop in RBC Target's long position.| BMO Aggregate vs. BMO Short Term Bond | BMO Aggregate vs. BMO Canadian Bank | BMO Aggregate vs. BMO Aggregate Bond | BMO Aggregate vs. BMO Balanced ETF |
| RBC Target vs. Franklin Global Aggregate | RBC Target vs. Franklin Large Cap | RBC Target vs. First Trust Senior | RBC Target vs. BMO Aggregate Bond |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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