Correlation Between BMO Global and RBC Quant
Can any of the company-specific risk be diversified away by investing in both BMO Global 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 Global 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 Global High and RBC Quant European, you can compare the effects of market volatilities on BMO Global 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 Global with a short position of RBC Quant. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Global and RBC Quant.
Diversification Opportunities for BMO Global and RBC Quant
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between BMO and RBC is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding BMO Global High and RBC Quant European in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Quant European and BMO Global 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 Global 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 European has no effect on the direction of BMO Global i.e., BMO Global and RBC Quant go up and down completely randomly.
Pair Corralation between BMO Global and RBC Quant
Assuming the 90 days trading horizon BMO Global is expected to generate 7.8 times less return on investment than RBC Quant. But when comparing it to its historical volatility, BMO Global High is 1.11 times less risky than RBC Quant. It trades about 0.04 of its potential returns per unit of risk. RBC Quant European is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 2,722 in RBC Quant European on December 1, 2024 and sell it today you would earn a total of 88.00 from holding RBC Quant European or generate 3.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Global High vs. RBC Quant European
Performance |
| Timeline |
| BMO Global High |
| RBC Quant European |
BMO Global and RBC Quant Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Global and RBC Quant
The main advantage of trading using opposite BMO Global and RBC Quant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Global 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 Global vs. BMO Short Term Bond | BMO Global vs. BMO Canadian Bank | BMO Global vs. BMO Aggregate Bond | BMO Global vs. BMO Balanced ETF |
| RBC Quant vs. RBC Quant European | RBC Quant vs. RBC Quant EAFE | RBC Quant vs. RBC Quant Dividend | RBC Quant vs. RBC Quant Canadian |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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