Correlation Between Ford and BMO Real
Can any of the company-specific risk be diversified away by investing in both Ford and BMO Real 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 Real 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 Real Return, you can compare the effects of market volatilities on Ford and BMO Real 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 Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and BMO Real.
Diversification Opportunities for Ford and BMO Real
Good diversification
The 3 months correlation between Ford and BMO is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and BMO Real Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Real Return 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 Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Real Return has no effect on the direction of Ford i.e., Ford and BMO Real go up and down completely randomly.
Pair Corralation between Ford and BMO Real
Taking into account the 90-day investment horizon Ford Motor is expected to generate 3.39 times more return on investment than BMO Real. However, Ford is 3.39 times more volatile than BMO Real Return. It trades about 0.23 of its potential returns per unit of risk. BMO Real Return is currently generating about 0.1 per unit of risk. If you would invest 1,015 in Ford Motor on September 1, 2024 and sell it today you would earn a total of 98.00 from holding Ford Motor or generate 9.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 91.3% |
| Values | Daily Returns |
Ford Motor vs. BMO Real Return
Performance |
| Timeline |
| Ford Motor |
| BMO Real Return |
Ford and BMO Real Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and BMO Real
The main advantage of trading using opposite Ford and BMO Real positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, BMO Real 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 Real will offset losses from the drop in BMO Real's long position.The idea behind Ford Motor and BMO Real Return 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 Real vs. BMO Long Corporate | BMO Real vs. BMO Short Provincial | BMO Real vs. BMO Short Federal | BMO Real vs. BMO Emerging Markets |
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
| Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance |