Correlation Between Brompton Global and BMO Global
Can any of the company-specific risk be diversified away by investing in both Brompton Global and BMO Global 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 Brompton Global and BMO Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Brompton Global Dividend and BMO Global Consumer, you can compare the effects of market volatilities on Brompton Global and BMO Global 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 Brompton Global with a short position of BMO Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brompton Global and BMO Global.
Diversification Opportunities for Brompton Global and BMO Global
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Brompton and BMO is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Brompton Global Dividend and BMO Global Consumer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Global Consumer and Brompton Global 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 Brompton Global Dividend are associated (or correlated) with BMO Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Global Consumer has no effect on the direction of Brompton Global i.e., Brompton Global and BMO Global go up and down completely randomly.
Pair Corralation between Brompton Global and BMO Global
Assuming the 90 days trading horizon Brompton Global is expected to generate 1.75 times less return on investment than BMO Global. But when comparing it to its historical volatility, Brompton Global Dividend is 1.01 times less risky than BMO Global. It trades about 0.16 of its potential returns per unit of risk. BMO Global Consumer is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 3,978 in BMO Global Consumer on August 31, 2024 and sell it today you would earn a total of 263.00 from holding BMO Global Consumer or generate 6.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Brompton Global Dividend vs. BMO Global Consumer
Performance |
| Timeline |
| Brompton Global Dividend |
| BMO Global Consumer |
Brompton Global and BMO Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brompton Global and BMO Global
The main advantage of trading using opposite Brompton Global and BMO Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brompton Global position performs unexpectedly, BMO Global 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 Global will offset losses from the drop in BMO Global's long position.| Brompton Global vs. Global Healthcare Income | Brompton Global vs. Brompton European Dividend | Brompton Global vs. Forstrong Global Income | Brompton Global vs. iShares Canadian HYBrid |
| BMO Global vs. Brompton Global Dividend | BMO Global vs. Brompton European Dividend | BMO Global vs. Brompton North American | BMO Global vs. Global Healthcare Income |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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