Correlation Between Brompton Global and BMO Equal
Can any of the company-specific risk be diversified away by investing in both Brompton Global and BMO Equal 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 Equal 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 Equal Weight, you can compare the effects of market volatilities on Brompton Global and BMO Equal 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 Equal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brompton Global and BMO Equal.
Diversification Opportunities for Brompton Global and BMO Equal
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Brompton and BMO is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Brompton Global Dividend and BMO Equal Weight in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Equal Weight 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 Equal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Equal Weight has no effect on the direction of Brompton Global i.e., Brompton Global and BMO Equal go up and down completely randomly.
Pair Corralation between Brompton Global and BMO Equal
Assuming the 90 days trading horizon Brompton Global is expected to generate 2.16 times less return on investment than BMO Equal. But when comparing it to its historical volatility, Brompton Global Dividend is 2.11 times less risky than BMO Equal. It trades about 0.15 of its potential returns per unit of risk. BMO Equal Weight is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 2,638 in BMO Equal Weight on August 25, 2024 and sell it today you would earn a total of 1,331 from holding BMO Equal Weight or generate 50.45% 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 Equal Weight
Performance |
| Timeline |
| Brompton Global Dividend |
| BMO Equal Weight |
Brompton Global and BMO Equal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brompton Global and BMO Equal
The main advantage of trading using opposite Brompton Global and BMO Equal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brompton Global position performs unexpectedly, BMO Equal 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 Equal will offset losses from the drop in BMO Equal's long position.| Brompton Global vs. Global Healthcare Income | Brompton Global vs. Tech Leaders Income | Brompton Global vs. Brompton North American | Brompton Global vs. Brompton European Dividend |
| BMO Equal vs. Brompton Global Dividend | BMO Equal vs. Tech Leaders Income | BMO Equal vs. Global Healthcare Income | BMO Equal vs. Brompton European Dividend |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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