Correlation Between BMO Aggregate and Royal Bank
Can any of the company-specific risk be diversified away by investing in both BMO Aggregate and Royal Bank 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 Royal Bank 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 Royal Bank of, you can compare the effects of market volatilities on BMO Aggregate and Royal Bank 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 Royal Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Aggregate and Royal Bank.
Diversification Opportunities for BMO Aggregate and Royal Bank
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between BMO and Royal is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding BMO Aggregate Bond and Royal Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royal Bank 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 Royal Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royal Bank has no effect on the direction of BMO Aggregate i.e., BMO Aggregate and Royal Bank go up and down completely randomly.
Pair Corralation between BMO Aggregate and Royal Bank
Assuming the 90 days trading horizon BMO Aggregate is expected to generate 53.56 times less return on investment than Royal Bank. But when comparing it to its historical volatility, BMO Aggregate Bond is 2.28 times less risky than Royal Bank. It trades about 0.0 of its potential returns per unit of risk. Royal Bank of is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,951 in Royal Bank of on August 26, 2024 and sell it today you would earn a total of 484.00 from holding Royal Bank of or generate 24.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 93.55% |
| Values | Daily Returns |
BMO Aggregate Bond vs. Royal Bank of
Performance |
| Timeline |
| BMO Aggregate Bond |
| Royal Bank |
BMO Aggregate and Royal Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Aggregate and Royal Bank
The main advantage of trading using opposite BMO Aggregate and Royal Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Aggregate position performs unexpectedly, Royal Bank 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 Royal Bank will offset losses from the drop in Royal Bank'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 |
| Royal Bank vs. Forstrong Global Income | Royal Bank vs. BMO Aggregate Bond | Royal Bank vs. Terreno Resources Corp | Royal Bank vs. iShares Canadian HYBrid |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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