Correlation Between RBC Quant and BMO Dividend

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

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

Diversification Opportunities for RBC Quant and BMO Dividend

0.06

Correlation Coefficient

RBC Quant  BMO Dividend

Significant diversification

The 3 months correlation between RBC and BMO is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding RBC Quant Dividend and BMO Dividend ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Dividend ETF and RBC Quant 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 RBC Quant Dividend are associated (or correlated) with BMO Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Dividend ETF has no effect on the direction of RBC Quant i.e., RBC Quant and BMO Dividend go up and down completely randomly.

Pair Corralation between RBC Quant and BMO Dividend

Assuming the 90 days trading horizon RBC Quant Dividend is expected to under-perform the BMO Dividend. In addition to that, RBC Quant is 1.15 times more volatile than BMO Dividend ETF. It trades about -0.07 of its total potential returns per unit of risk. BMO Dividend ETF is currently generating about 0.03 per unit of volatility. If you would invest  4,599  in BMO Dividend ETF on December 28, 2024 and sell it today you would earn a total of  66.00  from holding BMO Dividend ETF or generate 1.44% return on investment over 90 days.

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

RBC Quant Dividend  vs.  BMO Dividend ETF

RBC Quant Dividend

Risk-Adjusted Performance

Very Weak

Over the last 90 days RBC Quant Dividend has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, RBC Quant is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

BMO Dividend ETF

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BMO Dividend ETF are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, BMO Dividend is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with RBC Quant and BMO Dividend

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

The idea behind RBC Quant Dividend and BMO Dividend ETF 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.