Correlation Between Fidelity High and BMO Europe
Can any of the company-specific risk be diversified away by investing in both Fidelity High 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 Fidelity High and BMO Europe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fidelity High Dividend and BMO Europe High, you can compare the effects of market volatilities on Fidelity High 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 Fidelity High with a short position of BMO Europe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity High and BMO Europe.
Diversification Opportunities for Fidelity High and BMO Europe
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Fidelity and BMO is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity High 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 Fidelity High 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 Fidelity High 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 Fidelity High i.e., Fidelity High and BMO Europe go up and down completely randomly.
Pair Corralation between Fidelity High and BMO Europe
Assuming the 90 days trading horizon Fidelity High Dividend is expected to generate 1.15 times more return on investment than BMO Europe. However, Fidelity High is 1.15 times more volatile than BMO Europe High. It trades about 0.07 of its potential returns per unit of risk. BMO Europe High is currently generating about 0.06 per unit of risk. If you would invest 2,610 in Fidelity High Dividend on August 26, 2024 and sell it today you would earn a total of 720.00 from holding Fidelity High Dividend or generate 27.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fidelity High Dividend vs. BMO Europe High
Performance |
| Timeline |
| Fidelity High Dividend |
| BMO Europe High |
Fidelity High and BMO Europe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fidelity High and BMO Europe
The main advantage of trading using opposite Fidelity High and BMO Europe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity High 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.| Fidelity High vs. BMO Europe High | Fidelity High vs. BMO Covered Call | Fidelity High vs. BMO Covered Call | Fidelity 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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