Correlation Between GM and BMO Global
Can any of the company-specific risk be diversified away by investing in both GM 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 GM and BMO Global 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 Global High, you can compare the effects of market volatilities on GM 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 GM with a short position of BMO Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and BMO Global.
Diversification Opportunities for GM and BMO Global
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GM and BMO is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and BMO Global High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Global High 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 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 High has no effect on the direction of GM i.e., GM and BMO Global go up and down completely randomly.
Pair Corralation between GM and BMO Global
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.83 times more return on investment than BMO Global. However, GM is 1.83 times more volatile than BMO Global High. It trades about -0.08 of its potential returns per unit of risk. BMO Global High is currently generating about -0.23 per unit of risk. If you would invest 4,836 in General Motors on January 4, 2025 and sell it today you would lose (246.00) from holding General Motors or give up 5.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
General Motors vs. BMO Global High
Performance |
| Timeline |
| General Motors |
| BMO Global High |
GM and BMO Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and BMO Global
The main advantage of trading using opposite GM and BMO Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM 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.The idea behind General Motors and BMO Global High 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 Global vs. BMO Short Term Bond | BMO Global vs. BMO Canadian Bank | BMO Global vs. BMO Aggregate Bond | BMO Global vs. BMO Balanced ETF |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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