Correlation Between Microsoft and BMO International
Can any of the company-specific risk be diversified away by investing in both Microsoft and BMO International 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 Microsoft and BMO International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and BMO International Dividend, you can compare the effects of market volatilities on Microsoft and BMO International 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 Microsoft with a short position of BMO International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and BMO International.
Diversification Opportunities for Microsoft and BMO International
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and BMO is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and BMO International Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO International and Microsoft 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 Microsoft are associated (or correlated) with BMO International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO International has no effect on the direction of Microsoft i.e., Microsoft and BMO International go up and down completely randomly.
Pair Corralation between Microsoft and BMO International
Given the investment horizon of 90 days Microsoft is expected to under-perform the BMO International. In addition to that, Microsoft is 2.03 times more volatile than BMO International Dividend. It trades about -0.04 of its total potential returns per unit of risk. BMO International Dividend is currently generating about -0.06 per unit of volatility. If you would invest 2,731 in BMO International Dividend on August 25, 2024 and sell it today you would lose (32.00) from holding BMO International Dividend or give up 1.17% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Microsoft vs. BMO International Dividend
Performance |
| Timeline |
| Microsoft |
| BMO International |
Microsoft and BMO International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and BMO International
The main advantage of trading using opposite Microsoft and BMO International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, BMO International 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 International will offset losses from the drop in BMO International's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| BMO International vs. iShares Core MSCI | BMO International vs. Vanguard FTSE Developed | BMO International vs. iShares MSCI EAFE | BMO International vs. iShares Core MSCI |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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