Correlation Between Guardian and BMO Low
Can any of the company-specific risk be diversified away by investing in both Guardian 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 Guardian and BMO Low into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Guardian i3 Quality and BMO Low Volatility, you can compare the effects of market volatilities on Guardian 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 Guardian with a short position of BMO Low. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guardian and BMO Low.
Diversification Opportunities for Guardian and BMO Low
Poor diversification
The 3 months correlation between Guardian and BMO is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Guardian i3 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 Guardian 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 Guardian i3 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 Guardian i.e., Guardian and BMO Low go up and down completely randomly.
Pair Corralation between Guardian and BMO Low
Assuming the 90 days trading horizon Guardian i3 Quality is expected to generate 2.28 times more return on investment than BMO Low. However, Guardian is 2.28 times more volatile than BMO Low Volatility. It trades about 0.12 of its potential returns per unit of risk. BMO Low Volatility is currently generating about 0.21 per unit of risk. If you would invest 2,662 in Guardian i3 Quality on September 1, 2024 and sell it today you would earn a total of 441.00 from holding Guardian i3 Quality or generate 16.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Guardian i3 Quality vs. BMO Low Volatility
Performance |
| Timeline |
| Guardian i3 Quality |
| BMO Low Volatility |
Guardian and BMO Low Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Guardian and BMO Low
The main advantage of trading using opposite Guardian and BMO Low positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guardian 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.| Guardian vs. Guardian Directed Equity | Guardian vs. Guardian Canadian Focused | Guardian vs. Guardian Canadian Sector | Guardian vs. Guardian Ultra Short Canadian |
| 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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