Correlation Between GM and BMO Canadian
Can any of the company-specific risk be diversified away by investing in both GM and BMO Canadian 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 GM and BMO Canadian into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and BMO Canadian Bank, you can compare the effects of market volatilities on GM and BMO Canadian 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 GM with a short position of BMO Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and BMO Canadian.
Diversification Opportunities for GM and BMO Canadian
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GM and BMO is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and BMO Canadian Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Canadian Bank and GM 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 General Motors are associated (or correlated) with BMO Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Canadian Bank has no effect on the direction of GM i.e., GM and BMO Canadian go up and down completely randomly.
Pair Corralation between GM and BMO Canadian
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the BMO Canadian. In addition to that, GM is 28.55 times more volatile than BMO Canadian Bank. It trades about -0.05 of its total potential returns per unit of risk. BMO Canadian Bank is currently generating about 0.19 per unit of volatility. If you would invest 3,032 in BMO Canadian Bank on November 3, 2024 and sell it today you would earn a total of 13.00 from holding BMO Canadian Bank or generate 0.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 90.91% |
| Values | Daily Returns |
General Motors vs. BMO Canadian Bank
Performance |
| Timeline |
| General Motors |
| BMO Canadian Bank |
GM and BMO Canadian Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and BMO Canadian
The main advantage of trading using opposite GM and BMO Canadian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, BMO Canadian 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 Canadian will offset losses from the drop in BMO Canadian's long position.The idea behind General Motors and BMO Canadian Bank 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 Canadian vs. BMO Aggregate Bond | BMO Canadian vs. iShares Canadian Universe | BMO Canadian vs. BMO Core Plus | BMO Canadian vs. BMO Discount Bond |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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