Correlation Between BMO Global and Financial
Can any of the company-specific risk be diversified away by investing in both BMO Global and Financial 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 BMO Global and Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Global Communications and Financial 15 Split, you can compare the effects of market volatilities on BMO Global and Financial 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 BMO Global with a short position of Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Global and Financial.
Diversification Opportunities for BMO Global and Financial
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between BMO and Financial is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding BMO Global Communications and Financial 15 Split in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial 15 Split and BMO 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 BMO Global Communications are associated (or correlated) with Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial 15 Split has no effect on the direction of BMO Global i.e., BMO Global and Financial go up and down completely randomly.
Pair Corralation between BMO Global and Financial
Assuming the 90 days trading horizon BMO Global Communications is expected to generate 2.87 times more return on investment than Financial. However, BMO Global is 2.87 times more volatile than Financial 15 Split. It trades about 0.22 of its potential returns per unit of risk. Financial 15 Split is currently generating about 0.24 per unit of risk. If you would invest 3,355 in BMO Global Communications on September 3, 2024 and sell it today you would earn a total of 686.00 from holding BMO Global Communications or generate 20.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Global Communications vs. Financial 15 Split
Performance |
| Timeline |
| BMO Global Communications |
| Financial 15 Split |
BMO Global and Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Global and Financial
The main advantage of trading using opposite BMO Global and Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Global position performs unexpectedly, Financial 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 Financial will offset losses from the drop in Financial's long position.| BMO Global vs. International Zeolite Corp | BMO Global vs. European Residential Real | BMO Global vs. Financial 15 Split | BMO Global vs. Rubicon Organics |
| Financial vs. North American Financial | Financial vs. Dividend 15 Split | Financial vs. Dividend Growth Split | Financial vs. Dividend 15 Split |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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