Correlation Between RBC Quant and BMO MSCI

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

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

Diversification Opportunities for RBC Quant and BMO MSCI

0.31

Correlation Coefficient

RBC Quant  BMO MSCI

Weak diversification

The 3 months correlation between RBC and BMO is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding RBC Quant EAFE and BMO MSCI EAFE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO MSCI EAFE 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 EAFE are associated (or correlated) with BMO MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO MSCI EAFE has no effect on the direction of RBC Quant i.e., RBC Quant and BMO MSCI go up and down completely randomly.

Pair Corralation between RBC Quant and BMO MSCI

Assuming the 90 days trading horizon RBC Quant EAFE is expected to generate 1.35 times more return on investment than BMO MSCI. However, RBC Quant is 1.35 times more volatile than BMO MSCI EAFE. It trades about 0.18 of its potential returns per unit of risk. BMO MSCI EAFE is currently generating about 0.2 per unit of risk. If you would invest  2,837  in RBC Quant EAFE on April 25, 2025 and sell it today you would earn a total of  295.00  from holding RBC Quant EAFE or generate 10.4% return on investment over 90 days.

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

RBC Quant EAFE  vs.  BMO MSCI EAFE

RBC Quant EAFE

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Quant EAFE are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, RBC Quant may actually be approaching a critical reversion point that can send shares even higher in August 2025.

BMO MSCI EAFE

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BMO MSCI EAFE are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, BMO MSCI may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with RBC Quant and BMO MSCI

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

The idea behind RBC Quant EAFE and BMO MSCI EAFE 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.