Correlation Between Brompton European and BMO Europe
Can any of the company-specific risk be diversified away by investing in both Brompton European 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 Brompton European and BMO Europe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Brompton European Dividend and BMO Europe High, you can compare the effects of market volatilities on Brompton European 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 Brompton European with a short position of BMO Europe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brompton European and BMO Europe.
Diversification Opportunities for Brompton European and BMO Europe
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Brompton and BMO is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Brompton European Dividend 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 Brompton European 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 Brompton European Dividend 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 Brompton European i.e., Brompton European and BMO Europe go up and down completely randomly.
Pair Corralation between Brompton European and BMO Europe
Assuming the 90 days trading horizon Brompton European Dividend is expected to generate 2.73 times more return on investment than BMO Europe. However, Brompton European is 2.73 times more volatile than BMO Europe High. It trades about 0.05 of its potential returns per unit of risk. BMO Europe High is currently generating about -0.07 per unit of risk. If you would invest 1,055 in Brompton European Dividend on September 1, 2024 and sell it today you would earn a total of 16.00 from holding Brompton European Dividend or generate 1.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Brompton European Dividend vs. BMO Europe High
Performance |
| Timeline |
| Brompton European |
| BMO Europe High |
Brompton European and BMO Europe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brompton European and BMO Europe
The main advantage of trading using opposite Brompton European and BMO Europe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brompton European 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.| Brompton European vs. Brompton Global Dividend | Brompton European vs. Global Healthcare Income | Brompton European vs. Tech Leaders Income | Brompton European vs. Brompton North American |
| 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
Other Complementary Tools
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets |