Correlation Between European Residential and BMO Mid
Can any of the company-specific risk be diversified away by investing in both European Residential and BMO Mid 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 European Residential and BMO Mid into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between European Residential Real and BMO Mid Provincial, you can compare the effects of market volatilities on European Residential and BMO Mid 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 European Residential with a short position of BMO Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of European Residential and BMO Mid.
Diversification Opportunities for European Residential and BMO Mid
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between European and BMO is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding European Residential Real and BMO Mid Provincial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Mid Provincial and European Residential 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 European Residential Real are associated (or correlated) with BMO Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Mid Provincial has no effect on the direction of European Residential i.e., European Residential and BMO Mid go up and down completely randomly.
Pair Corralation between European Residential and BMO Mid
Assuming the 90 days trading horizon European Residential Real is expected to generate 8.51 times more return on investment than BMO Mid. However, European Residential is 8.51 times more volatile than BMO Mid Provincial. It trades about 0.27 of its potential returns per unit of risk. BMO Mid Provincial is currently generating about 0.14 per unit of risk. If you would invest 312.00 in European Residential Real on September 3, 2024 and sell it today you would earn a total of 68.00 from holding European Residential Real or generate 21.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
European Residential Real vs. BMO Mid Provincial
Performance |
| Timeline |
| European Residential Real |
| BMO Mid Provincial |
European Residential and BMO Mid Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with European Residential and BMO Mid
The main advantage of trading using opposite European Residential and BMO Mid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if European Residential position performs unexpectedly, BMO Mid 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 Mid will offset losses from the drop in BMO Mid's long position.| European Residential vs. BSR Real Estate | European Residential vs. Minto Apartment Real | European Residential vs. Nexus Real Estate | European Residential vs. Morguard North American |
| BMO Mid vs. BMO Long Federal | BMO Mid vs. BMO Long Provincial | BMO Mid vs. Wealthsimple Developed Markets | BMO Mid vs. Wealthsimple North America |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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