Correlation Between Dow Jones and BMO High
Can any of the company-specific risk be diversified away by investing in both Dow Jones and BMO High 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 High 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 High Dividend, you can compare the effects of market volatilities on Dow Jones and BMO High 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 High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and BMO High.
Diversification Opportunities for Dow Jones and BMO High
Poor diversification
The 3 months correlation between Dow and BMO is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and BMO High Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO High Dividend 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 High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO High Dividend has no effect on the direction of Dow Jones i.e., Dow Jones and BMO High go up and down completely randomly.
Pair Corralation between Dow Jones and BMO High
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.97 times more return on investment than BMO High. However, Dow Jones Industrial is 1.03 times less risky than BMO High. It trades about 0.33 of its potential returns per unit of risk. BMO High Dividend is currently generating about 0.08 per unit of risk. If you would invest 4,263,520 in Dow Jones Industrial on November 9, 2024 and sell it today you would earn a total of 211,243 from holding Dow Jones Industrial or generate 4.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 90.91% |
| Values | Daily Returns |
Dow Jones Industrial vs. BMO High Dividend
Performance |
| Timeline |
Dow Jones and BMO High Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
BMO High Dividend
Pair trading matchups for BMO High
Pair Trading with Dow Jones and BMO High
The main advantage of trading using opposite Dow Jones and BMO High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, BMO High 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 High will offset losses from the drop in BMO High's long position.| Dow Jones vs. Douglas Emmett | Dow Jones vs. Todos Medical | Dow Jones vs. Eastern Co | Dow Jones vs. Merit Medical Systems |
| BMO High vs. BMO Europe High | BMO High vs. BMO Covered Call | BMO High vs. BMO Covered Call | BMO High vs. BMO Europe High |
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 CEOs Directory module to screen CEOs from public companies around the world.
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