Correlation Between Harvest Global and BMO Government
Can any of the company-specific risk be diversified away by investing in both Harvest Global and BMO Government 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 Harvest Global and BMO Government into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Harvest Global REIT and BMO Government Bond, you can compare the effects of market volatilities on Harvest Global and BMO Government 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 Harvest Global with a short position of BMO Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of Harvest Global and BMO Government.
Diversification Opportunities for Harvest Global and BMO Government
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Harvest and BMO is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Harvest Global REIT and BMO Government Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Government Bond and Harvest Global 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 Harvest Global REIT are associated (or correlated) with BMO Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Government Bond has no effect on the direction of Harvest Global i.e., Harvest Global and BMO Government go up and down completely randomly.
Pair Corralation between Harvest Global and BMO Government
Assuming the 90 days trading horizon Harvest Global REIT is expected to generate 2.13 times more return on investment than BMO Government. However, Harvest Global is 2.13 times more volatile than BMO Government Bond. It trades about 0.03 of its potential returns per unit of risk. BMO Government Bond is currently generating about 0.03 per unit of risk. If you would invest 575.00 in Harvest Global REIT on September 3, 2024 and sell it today you would earn a total of 71.00 from holding Harvest Global REIT or generate 12.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Harvest Global REIT vs. BMO Government Bond
Performance |
| Timeline |
| Harvest Global REIT |
| BMO Government Bond |
Harvest Global and BMO Government Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Harvest Global and BMO Government
The main advantage of trading using opposite Harvest Global and BMO Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Harvest Global position performs unexpectedly, BMO Government 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 Government will offset losses from the drop in BMO Government's long position.| Harvest Global vs. Harvest Equal Weight | Harvest Global vs. Harvest Brand Leaders | Harvest Global vs. Energy Leaders Plus | Harvest Global vs. Harvest Tech Achievers |
| BMO Government vs. BMO Short Corporate | BMO Government vs. BMO High Yield | BMO Government vs. iShares Core Canadian | BMO Government vs. Harvest Global REIT |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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