Correlation Between BMO Concentrated and RBC Select

Can any of the company-specific risk be diversified away by investing in both BMO Concentrated and RBC Select 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 Concentrated and RBC Select into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BMO Concentrated Global and RBC Select Balanced, you can compare the effects of market volatilities on BMO Concentrated and RBC Select 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 Concentrated with a short position of RBC Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Concentrated and RBC Select.

Diversification Opportunities for BMO Concentrated and RBC Select

0.91

Correlation Coefficient

BMO Concentrated  RBC Select

Almost no diversification

The 3 months correlation between BMO and RBC is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding BMO Concentrated Global and RBC Select Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Select Balanced and BMO Concentrated 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 Concentrated Global are associated (or correlated) with RBC Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBC Select Balanced has no effect on the direction of BMO Concentrated i.e., BMO Concentrated and RBC Select go up and down completely randomly.

Pair Corralation between BMO Concentrated and RBC Select

Assuming the 90 days trading horizon BMO Concentrated Global is expected to under-perform the RBC Select. In addition to that, BMO Concentrated is 1.52 times more volatile than RBC Select Balanced. It trades about -0.1 of its total potential returns per unit of risk. RBC Select Balanced is currently generating about 0.0 per unit of volatility. If you would invest  3,379  in RBC Select Balanced on October 22, 2024 and sell it today you would lose (2.00) from holding RBC Select Balanced or give up 0.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

BMO Concentrated Global  vs.  RBC Select Balanced

BMO Concentrated Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BMO Concentrated Global has generated negative risk-adjusted returns adding no value to fund investors. In spite of rather sound fundamental indicators, BMO Concentrated is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

RBC Select Balanced

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RBC Select Balanced has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong basic indicators, RBC Select is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with BMO Concentrated and RBC Select

The main advantage of trading using opposite BMO Concentrated and RBC Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Concentrated position performs unexpectedly, RBC Select 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 Select will offset losses from the drop in RBC Select's long position.

The idea behind BMO Concentrated Global and RBC Select Balanced pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.