Correlation Between Dynamic Active and BMO Europe
Can any of the company-specific risk be diversified away by investing in both Dynamic Active and BMO Europe 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 Dynamic Active and BMO Europe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dynamic Active Preferred and BMO Europe High, you can compare the effects of market volatilities on Dynamic Active and BMO Europe 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 Dynamic Active with a short position of BMO Europe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dynamic Active and BMO Europe.
Diversification Opportunities for Dynamic Active and BMO Europe
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Dynamic and BMO is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Dynamic Active Preferred and BMO Europe High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Europe High and Dynamic Active 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 Dynamic Active Preferred are associated (or correlated) with BMO Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Europe High has no effect on the direction of Dynamic Active i.e., Dynamic Active and BMO Europe go up and down completely randomly.
Pair Corralation between Dynamic Active and BMO Europe
Assuming the 90 days trading horizon Dynamic Active Preferred is expected to generate 0.45 times more return on investment than BMO Europe. However, Dynamic Active Preferred is 2.24 times less risky than BMO Europe. It trades about 0.29 of its potential returns per unit of risk. BMO Europe High is currently generating about -0.16 per unit of risk. If you would invest 2,212 in Dynamic Active Preferred on August 31, 2024 and sell it today you would earn a total of 39.00 from holding Dynamic Active Preferred or generate 1.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dynamic Active Preferred vs. BMO Europe High
Performance |
| Timeline |
| Dynamic Active Preferred |
| BMO Europe High |
Dynamic Active and BMO Europe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dynamic Active and BMO Europe
The main advantage of trading using opposite Dynamic Active and BMO Europe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dynamic Active position performs unexpectedly, BMO Europe 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 Europe will offset losses from the drop in BMO Europe's long position.| Dynamic Active vs. iShares SPTSX Canadian | Dynamic Active vs. Global X Active | Dynamic Active vs. BMO Covered Call | Dynamic Active vs. Forstrong Global Income |
| BMO Europe vs. BMO Covered Call | BMO Europe vs. BMO High Dividend | BMO Europe vs. BMO Europe High | BMO Europe vs. BMO Covered Call |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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