Correlation Between BMO Laddered and RBC Canadian

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

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

Diversification Opportunities for BMO Laddered and RBC Canadian

0.97

Correlation Coefficient

BMO Laddered  RBC Canadian

Almost no diversification

The 3 months correlation between BMO and RBC is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding BMO Laddered Preferred and RBC Canadian Preferred in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Canadian Preferred and BMO Laddered 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 Laddered Preferred are associated (or correlated) with RBC Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBC Canadian Preferred has no effect on the direction of BMO Laddered i.e., BMO Laddered and RBC Canadian go up and down completely randomly.

Pair Corralation between BMO Laddered and RBC Canadian

Assuming the 90 days trading horizon BMO Laddered Preferred is expected to generate 1.0 times more return on investment than RBC Canadian. However, BMO Laddered is 1.0 times more volatile than RBC Canadian Preferred. It trades about 0.12 of its potential returns per unit of risk. RBC Canadian Preferred is currently generating about 0.11 per unit of risk. If you would invest  1,040  in BMO Laddered Preferred on September 4, 2024 and sell it today you would earn a total of  31.00  from holding BMO Laddered Preferred or generate 2.98% return on investment over 90 days.

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

BMO Laddered Preferred  vs.  RBC Canadian Preferred

BMO Laddered Preferred

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BMO Laddered Preferred are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, BMO Laddered is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

RBC Canadian Preferred

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Canadian Preferred are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, RBC Canadian is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with BMO Laddered and RBC Canadian

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

The idea behind BMO Laddered Preferred and RBC Canadian Preferred 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.

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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.