Correlation Between Dow Jones and BMO Laddered
Can any of the company-specific risk be diversified away by investing in both Dow Jones and BMO Laddered 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 Laddered 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 Laddered Preferred, you can compare the effects of market volatilities on Dow Jones and BMO Laddered 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 Laddered. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and BMO Laddered.
Diversification Opportunities for Dow Jones and BMO Laddered
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dow and BMO is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and BMO Laddered Preferred in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Laddered Preferred 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 Laddered. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Laddered Preferred has no effect on the direction of Dow Jones i.e., Dow Jones and BMO Laddered go up and down completely randomly.
Pair Corralation between Dow Jones and BMO Laddered
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 1.52 times more return on investment than BMO Laddered. However, Dow Jones is 1.52 times more volatile than BMO Laddered Preferred. It trades about 0.16 of its potential returns per unit of risk. BMO Laddered Preferred is currently generating about 0.11 per unit of risk. If you would invest 3,857,103 in Dow Jones Industrial on September 1, 2024 and sell it today you would earn a total of 633,962 from holding Dow Jones Industrial or generate 16.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.21% |
| Values | Daily Returns |
Dow Jones Industrial vs. BMO Laddered Preferred
Performance |
| Timeline |
Dow Jones and BMO Laddered Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
BMO Laddered Preferred
Pair trading matchups for BMO Laddered
Pair Trading with Dow Jones and BMO Laddered
The main advantage of trading using opposite Dow Jones and BMO Laddered positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, BMO Laddered 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 Laddered will offset losses from the drop in BMO Laddered's long position.| Dow Jones vs. Catalyst Pharmaceuticals | Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. National CineMedia | Dow Jones vs. Mink Therapeutics |
| BMO Laddered vs. iShares SPTSX Canadian | BMO Laddered vs. Global X Active | BMO Laddered vs. BMO Europe High | BMO Laddered vs. BMO Equal Weight |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
Other Complementary Tools
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency |