Correlation Between Fidelity High and BMO Low
Can any of the company-specific risk be diversified away by investing in both Fidelity High and BMO Low 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 Low into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fidelity High Quality and BMO Low Volatility, you can compare the effects of market volatilities on Fidelity High and BMO Low 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 Low. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity High and BMO Low.
Diversification Opportunities for Fidelity High and BMO Low
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fidelity and BMO is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity High Quality and BMO Low Volatility in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Low Volatility 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 Quality are associated (or correlated) with BMO Low. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Low Volatility has no effect on the direction of Fidelity High i.e., Fidelity High and BMO Low go up and down completely randomly.
Pair Corralation between Fidelity High and BMO Low
Assuming the 90 days trading horizon Fidelity High Quality is expected to generate 1.41 times more return on investment than BMO Low. However, Fidelity High is 1.41 times more volatile than BMO Low Volatility. It trades about 0.18 of its potential returns per unit of risk. BMO Low Volatility is currently generating about 0.16 per unit of risk. If you would invest 5,289 in Fidelity High Quality on September 1, 2024 and sell it today you would earn a total of 1,322 from holding Fidelity High Quality or generate 25.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fidelity High Quality vs. BMO Low Volatility
Performance |
| Timeline |
| Fidelity High Quality |
| BMO Low Volatility |
Fidelity High and BMO Low Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fidelity High and BMO Low
The main advantage of trading using opposite Fidelity High and BMO Low positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity High position performs unexpectedly, BMO Low 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 Low will offset losses from the drop in BMO Low's long position.| Fidelity High vs. Fidelity International High | Fidelity High vs. Fidelity Canadian High | Fidelity High vs. Fidelity High Dividend | Fidelity High vs. Fidelity Canadian High |
| BMO Low vs. BMO Low Volatility | BMO Low vs. BMO SPTSX Capped | BMO Low vs. BMO Canadian Dividend | BMO Low vs. BMO SP 500 |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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