Correlation Between CI Europe and BMO Europe
Can any of the company-specific risk be diversified away by investing in both CI Europe 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 CI Europe and BMO Europe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CI Europe Hedged and BMO Europe High, you can compare the effects of market volatilities on CI Europe 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 CI Europe with a short position of BMO Europe. Check out your portfolio center. Please also check ongoing floating volatility patterns of CI Europe and BMO Europe.
Diversification Opportunities for CI Europe and BMO Europe
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between EHE and BMO is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding CI Europe Hedged 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 CI Europe 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 CI Europe Hedged 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 CI Europe i.e., CI Europe and BMO Europe go up and down completely randomly.
Pair Corralation between CI Europe and BMO Europe
Assuming the 90 days trading horizon CI Europe is expected to generate 1.26 times less return on investment than BMO Europe. In addition to that, CI Europe is 1.06 times more volatile than BMO Europe High. It trades about 0.03 of its total potential returns per unit of risk. BMO Europe High is currently generating about 0.04 per unit of volatility. If you would invest 1,584 in BMO Europe High on August 29, 2024 and sell it today you would earn a total of 184.00 from holding BMO Europe High or generate 11.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CI Europe Hedged vs. BMO Europe High
Performance |
| Timeline |
| CI Europe Hedged |
| BMO Europe High |
CI Europe and BMO Europe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CI Europe and BMO Europe
The main advantage of trading using opposite CI Europe and BMO Europe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CI Europe 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.| CI Europe vs. BMO Europe High | CI Europe vs. BMO High Dividend | CI Europe vs. BMO Covered Call | CI Europe vs. BMO Premium Yield |
| BMO Europe vs. BMO Europe High | BMO Europe vs. BMO High Dividend | BMO Europe vs. BMO Covered Call | BMO Europe vs. BMO Global 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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