Correlation Between Ford and BMO High
Can any of the company-specific risk be diversified away by investing in both Ford 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 Ford and BMO High into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and BMO High Yield, you can compare the effects of market volatilities on Ford 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 Ford with a short position of BMO High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and BMO High.
Diversification Opportunities for Ford and BMO High
Very weak diversification
The 3 months correlation between Ford and BMO is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and BMO High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO High Yield and Ford 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 Ford Motor 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 Yield has no effect on the direction of Ford i.e., Ford and BMO High go up and down completely randomly.
Pair Corralation between Ford and BMO High
Taking into account the 90-day investment horizon Ford is expected to generate 2.89 times less return on investment than BMO High. In addition to that, Ford is 8.1 times more volatile than BMO High Yield. It trades about 0.01 of its total potential returns per unit of risk. BMO High Yield is currently generating about 0.2 per unit of volatility. If you would invest 1,695 in BMO High Yield on August 29, 2024 and sell it today you would earn a total of 219.00 from holding BMO High Yield or generate 12.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.52% |
| Values | Daily Returns |
Ford Motor vs. BMO High Yield
Performance |
| Timeline |
| Ford Motor |
| BMO High Yield |
Ford and BMO High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and BMO High
The main advantage of trading using opposite Ford and BMO High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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.The idea behind Ford Motor and BMO High Yield pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| BMO High vs. BMO High Yield | BMO High vs. BMO Preferred Share | BMO High vs. BMO Preferred Share | 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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