Correlation Between Energy Leaders and BMO Long
Can any of the company-specific risk be diversified away by investing in both Energy Leaders and BMO Long 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 Energy Leaders and BMO Long into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Energy Leaders Plus and BMO Long Federal, you can compare the effects of market volatilities on Energy Leaders and BMO Long 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 Energy Leaders with a short position of BMO Long. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Leaders and BMO Long.
Diversification Opportunities for Energy Leaders and BMO Long
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Energy and BMO is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Energy Leaders Plus and BMO Long Federal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Long Federal and Energy Leaders 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 Energy Leaders Plus are associated (or correlated) with BMO Long. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Long Federal has no effect on the direction of Energy Leaders i.e., Energy Leaders and BMO Long go up and down completely randomly.
Pair Corralation between Energy Leaders and BMO Long
Assuming the 90 days trading horizon Energy Leaders Plus is expected to generate 1.07 times more return on investment than BMO Long. However, Energy Leaders is 1.07 times more volatile than BMO Long Federal. It trades about 0.14 of its potential returns per unit of risk. BMO Long Federal is currently generating about 0.06 per unit of risk. If you would invest 323.00 in Energy Leaders Plus on August 28, 2024 and sell it today you would earn a total of 9.00 from holding Energy Leaders Plus or generate 2.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Energy Leaders Plus vs. BMO Long Federal
Performance |
| Timeline |
| Energy Leaders Plus |
| BMO Long Federal |
Energy Leaders and BMO Long Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Energy Leaders and BMO Long
The main advantage of trading using opposite Energy Leaders and BMO Long positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Leaders position performs unexpectedly, BMO Long 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 Long will offset losses from the drop in BMO Long's long position.| Energy Leaders vs. iShares SPTSX Capped | Energy Leaders vs. iShares SPTSX Global | Energy Leaders vs. iShares SPTSX 60 | Energy Leaders vs. iShares SPTSX Capped |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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