Correlation Between Dow Jones and BMO Junior
Can any of the company-specific risk be diversified away by investing in both Dow Jones and BMO Junior 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 Dow Jones and BMO Junior into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and BMO Junior Gold, you can compare the effects of market volatilities on Dow Jones and BMO Junior 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 Dow Jones with a short position of BMO Junior. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and BMO Junior.
Diversification Opportunities for Dow Jones and BMO Junior
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Dow and BMO is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and BMO Junior Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Junior Gold and Dow Jones 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 Dow Jones Industrial are associated (or correlated) with BMO Junior. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Junior Gold has no effect on the direction of Dow Jones i.e., Dow Jones and BMO Junior go up and down completely randomly.
Pair Corralation between Dow Jones and BMO Junior
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.75 times less return on investment than BMO Junior. But when comparing it to its historical volatility, Dow Jones Industrial is 2.64 times less risky than BMO Junior. It trades about 0.08 of its potential returns per unit of risk. BMO Junior Gold is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 6,267 in BMO Junior Gold on August 30, 2024 and sell it today you would earn a total of 3,433 from holding BMO Junior Gold or generate 54.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Dow Jones Industrial vs. BMO Junior Gold
Performance |
| Timeline |
Dow Jones and BMO Junior Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
BMO Junior Gold
Pair trading matchups for BMO Junior
Pair Trading with Dow Jones and BMO Junior
The main advantage of trading using opposite Dow Jones and BMO Junior positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, BMO Junior 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 Junior will offset losses from the drop in BMO Junior's long position.| Dow Jones vs. Kaltura | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. US Global Investors | Dow Jones vs. Analog Devices |
| BMO Junior vs. iShares SPTSX Capped | BMO Junior vs. iShares SPTSX Capped | BMO Junior vs. iShares SPTSX Capped | BMO Junior vs. iShares SPTSX Capped |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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