Correlation Between Financial and BMO Global
Can any of the company-specific risk be diversified away by investing in both Financial and BMO Global 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 Financial and BMO Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Financial 15 Split and BMO Global Communications, you can compare the effects of market volatilities on Financial and BMO Global 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 Financial with a short position of BMO Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial and BMO Global.
Diversification Opportunities for Financial and BMO Global
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Financial and BMO is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Financial 15 Split and BMO Global Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Global Communications and Financial 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 Financial 15 Split are associated (or correlated) with BMO Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Global Communications has no effect on the direction of Financial i.e., Financial and BMO Global go up and down completely randomly.
Pair Corralation between Financial and BMO Global
Assuming the 90 days trading horizon Financial is expected to generate 2.43 times less return on investment than BMO Global. But when comparing it to its historical volatility, Financial 15 Split is 2.07 times less risky than BMO Global. It trades about 0.35 of its potential returns per unit of risk. BMO Global Communications is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest 3,779 in BMO Global Communications on September 3, 2024 and sell it today you would earn a total of 262.00 from holding BMO Global Communications or generate 6.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Financial 15 Split vs. BMO Global Communications
Performance |
| Timeline |
| Financial 15 Split |
| BMO Global Communications |
Financial and BMO Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Financial and BMO Global
The main advantage of trading using opposite Financial and BMO Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financial position performs unexpectedly, BMO Global 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 Global will offset losses from the drop in BMO Global's long position.| Financial vs. North American Financial | Financial vs. Dividend 15 Split | Financial vs. Dividend Growth Split | Financial vs. Dividend 15 Split |
| BMO Global vs. International Zeolite Corp | BMO Global vs. European Residential Real | BMO Global vs. Financial 15 Split | BMO Global vs. Rubicon Organics |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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