Correlation Between Bank of America and BMO Short
Can any of the company-specific risk be diversified away by investing in both Bank of America and BMO Short 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 Bank of America and BMO Short into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank of America and BMO Short Term IG, you can compare the effects of market volatilities on Bank of America and BMO Short 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 Bank of America with a short position of BMO Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and BMO Short.
Diversification Opportunities for Bank of America and BMO Short
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bank and BMO is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and BMO Short Term IG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Short Term and Bank of America 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 Bank of America are associated (or correlated) with BMO Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Short Term has no effect on the direction of Bank of America i.e., Bank of America and BMO Short go up and down completely randomly.
Pair Corralation between Bank of America and BMO Short
Considering the 90-day investment horizon Bank of America is expected to under-perform the BMO Short. In addition to that, Bank of America is 5.77 times more volatile than BMO Short Term IG. It trades about -0.31 of its total potential returns per unit of risk. BMO Short Term IG is currently generating about 0.21 per unit of volatility. If you would invest 1,331 in BMO Short Term IG on November 27, 2024 and sell it today you would earn a total of 9.00 from holding BMO Short Term IG or generate 0.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. BMO Short Term IG
Performance |
| Timeline |
| Bank of America |
| BMO Short Term |
Bank of America and BMO Short Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and BMO Short
The main advantage of trading using opposite Bank of America and BMO Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, BMO Short 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 Short will offset losses from the drop in BMO Short's long position.| Bank of America vs. Citigroup | Bank of America vs. Wells Fargo | Bank of America vs. Toronto Dominion Bank | Bank of America vs. Royal Bank of |
| BMO Short vs. BMO Mid Term IG | BMO Short vs. BMO Short Provincial | BMO Short vs. BMO Short Federal | BMO Short vs. BMO Floating Rate |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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