Correlation Between Bank of America and BMO Europe
Can any of the company-specific risk be diversified away by investing in both Bank of America and BMO Europe 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 Europe 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 Europe High, you can compare the effects of market volatilities on Bank of America and BMO Europe 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 Europe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and BMO Europe.
Diversification Opportunities for Bank of America and BMO Europe
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bank and BMO is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and BMO Europe High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Europe High 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 Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Europe High has no effect on the direction of Bank of America i.e., Bank of America and BMO Europe go up and down completely randomly.
Pair Corralation between Bank of America and BMO Europe
Considering the 90-day investment horizon Bank of America is expected to under-perform the BMO Europe. In addition to that, Bank of America is 1.93 times more volatile than BMO Europe High. It trades about -0.16 of its total potential returns per unit of risk. BMO Europe High is currently generating about 0.32 per unit of volatility. If you would invest 1,757 in BMO Europe High on December 11, 2024 and sell it today you would earn a total of 212.00 from holding BMO Europe High or generate 12.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.56% |
| Values | Daily Returns |
Bank of America vs. BMO Europe High
Performance |
| Timeline |
| Bank of America |
| BMO Europe High |
Bank of America and BMO Europe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and BMO Europe
The main advantage of trading using opposite Bank of America and BMO Europe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, BMO Europe 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 Europe will offset losses from the drop in BMO Europe's long position.| Bank of America vs. Citigroup | Bank of America vs. Wells Fargo | Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC |
| BMO Europe vs. BMO Europe High | BMO Europe vs. BMO High Dividend | BMO Europe vs. BMO Covered Call | BMO Europe vs. BMO Global High |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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