Correlation Between BMO Europe and RBC Quant

Can any of the company-specific risk be diversified away by investing in both BMO Europe 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 Europe 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 Europe High and RBC Quant European, you can compare the effects of market volatilities on BMO Europe 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 Europe with a short position of RBC Quant. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Europe and RBC Quant.

Diversification Opportunities for BMO Europe and RBC Quant

0.9

Correlation Coefficient

BMO Europe  RBC Quant

Almost no diversification

The 3 months correlation between BMO and RBC is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding BMO Europe 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 Europe 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 Europe 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 Europe i.e., BMO Europe and RBC Quant go up and down completely randomly.

Pair Corralation between BMO Europe and RBC Quant

Assuming the 90 days trading horizon BMO Europe is expected to generate 1.64 times less return on investment than RBC Quant. But when comparing it to its historical volatility, BMO Europe High is 1.1 times less risky than RBC Quant. It trades about 0.17 of its potential returns per unit of risk. RBC Quant European is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  2,692  in RBC Quant European on April 20, 2025 and sell it today you would earn a total of  324.00  from holding RBC Quant European or generate 12.04% return on investment over 90 days.

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

BMO Europe High  vs.  RBC Quant European

BMO Europe High

Risk-Adjusted Performance

Good

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

RBC Quant European

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Quant European are ranked lower than 19 (%) 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.

Pair Trading with BMO Europe and RBC Quant

The main advantage of trading using opposite BMO Europe and RBC Quant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Europe 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.

The idea behind BMO Europe High and RBC Quant European 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 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.