Correlation Between BMO Europe and RBC Quant
Can any of the company-specific risk be diversified away by investing in both BMO Europe 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 Europe 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 Europe High and RBC Quant EAFE, you can compare the effects of market volatilities on BMO Europe 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 Europe with a short position of RBC Quant. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Europe and RBC Quant.
Diversification Opportunities for BMO Europe and RBC Quant
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between BMO and RBC is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding BMO Europe High and RBC Quant EAFE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Quant EAFE and BMO Europe 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 Europe High 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 EAFE has no effect on the direction of BMO Europe i.e., BMO Europe and RBC Quant go up and down completely randomly.
Pair Corralation between BMO Europe and RBC Quant
Assuming the 90 days trading horizon BMO Europe High is expected to generate 0.95 times more return on investment than RBC Quant. However, BMO Europe High is 1.05 times less risky than RBC Quant. It trades about 0.03 of its potential returns per unit of risk. RBC Quant EAFE is currently generating about -0.05 per unit of risk. If you would invest 2,013 in BMO Europe High on September 5, 2024 and sell it today you would earn a total of 7.00 from holding BMO Europe High or generate 0.35% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
BMO Europe High vs. RBC Quant EAFE
Performance |
Timeline |
BMO Europe High |
RBC Quant EAFE |
BMO Europe and RBC Quant Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with BMO Europe and RBC Quant
The main advantage of trading using opposite BMO Europe and RBC Quant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Europe 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 Europe vs. RBC Quant EAFE | BMO Europe vs. RBC Quant Dividend | BMO Europe vs. RBC Quant Emerging | BMO Europe vs. RBC Quant Canadian |
RBC Quant vs. RBC Quant Dividend | RBC Quant vs. RBC Quant Canadian | RBC Quant vs. RBC Quant European | RBC Quant vs. RBC Quant Emerging |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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