Correlation Between Apple and BMO Mid
Can any of the company-specific risk be diversified away by investing in both Apple and BMO Mid 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 Apple and BMO Mid into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and BMO Mid Term IG, you can compare the effects of market volatilities on Apple and BMO Mid 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 Apple with a short position of BMO Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and BMO Mid.
Diversification Opportunities for Apple and BMO Mid
Poor diversification
The 3 months correlation between Apple and BMO is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and BMO Mid Term IG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Mid Term and Apple 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 Apple Inc are associated (or correlated) with BMO Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Mid Term has no effect on the direction of Apple i.e., Apple and BMO Mid go up and down completely randomly.
Pair Corralation between Apple and BMO Mid
Given the investment horizon of 90 days Apple Inc is expected to under-perform the BMO Mid. In addition to that, Apple is 3.91 times more volatile than BMO Mid Term IG. It trades about -0.08 of its total potential returns per unit of risk. BMO Mid Term IG is currently generating about 0.06 per unit of volatility. If you would invest 1,843 in BMO Mid Term IG on November 3, 2024 and sell it today you would earn a total of 11.00 from holding BMO Mid Term IG or generate 0.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 90.91% |
| Values | Daily Returns |
Apple Inc vs. BMO Mid Term IG
Performance |
| Timeline |
| Apple Inc |
| BMO Mid Term |
Apple and BMO Mid Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and BMO Mid
The main advantage of trading using opposite Apple and BMO Mid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple position performs unexpectedly, BMO Mid 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 Mid will offset losses from the drop in BMO Mid's long position.The idea behind Apple Inc and BMO Mid Term IG 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.| BMO Mid vs. BMO Mid Term IG | BMO Mid vs. BMO Mid Corporate | BMO Mid vs. CI Canadian Banks | BMO Mid vs. BMO Long Corporate |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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