Correlation Between BMO Covered and RBC Quant
Can any of the company-specific risk be diversified away by investing in both BMO Covered and RBC Quant 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 Covered and RBC Quant into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Covered Call and RBC Quant Dividend, you can compare the effects of market volatilities on BMO Covered and RBC Quant 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 Covered with a short position of RBC Quant. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Covered and RBC Quant.
Diversification Opportunities for BMO Covered and RBC Quant
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between BMO and RBC is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding BMO Covered Call and RBC Quant Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Quant Dividend and BMO Covered 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 Covered Call are associated (or correlated) with RBC Quant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBC Quant Dividend has no effect on the direction of BMO Covered i.e., BMO Covered and RBC Quant go up and down completely randomly.
Pair Corralation between BMO Covered and RBC Quant
Assuming the 90 days trading horizon BMO Covered is expected to generate 1.63 times less return on investment than RBC Quant. But when comparing it to its historical volatility, BMO Covered Call is 2.65 times less risky than RBC Quant. It trades about 0.43 of its potential returns per unit of risk. RBC Quant Dividend is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 2,458 in RBC Quant Dividend on August 29, 2024 and sell it today you would earn a total of 131.00 from holding RBC Quant Dividend or generate 5.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Covered Call vs. RBC Quant Dividend
Performance |
| Timeline |
| BMO Covered Call |
| RBC Quant Dividend |
BMO Covered and RBC Quant Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Covered and RBC Quant
The main advantage of trading using opposite BMO Covered and RBC Quant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Covered position performs unexpectedly, RBC Quant 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 Quant will offset losses from the drop in RBC Quant's long position.| BMO Covered vs. Brompton Global Dividend | BMO Covered vs. Tech Leaders Income | BMO Covered vs. Global Healthcare Income | BMO Covered vs. Brompton European Dividend |
| RBC Quant vs. RBC Quant Canadian | RBC Quant vs. RBC Quant EAFE | RBC Quant vs. RBC Quant European | RBC Quant vs. BMO Dividend ETF |
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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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