Correlation Between Microsoft and BMO Low
Can any of the company-specific risk be diversified away by investing in both Microsoft and BMO Low 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 Low into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and BMO Low Volatility, you can compare the effects of market volatilities on Microsoft and BMO Low 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 Low. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and BMO Low.
Diversification Opportunities for Microsoft and BMO Low
Weak diversification
The 3 months correlation between Microsoft and BMO is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and BMO Low Volatility in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Low Volatility 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 Low. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Low Volatility has no effect on the direction of Microsoft i.e., Microsoft and BMO Low go up and down completely randomly.
Pair Corralation between Microsoft and BMO Low
Given the investment horizon of 90 days Microsoft is expected to generate 2.54 times more return on investment than BMO Low. However, Microsoft is 2.54 times more volatile than BMO Low Volatility. It trades about 0.08 of its potential returns per unit of risk. BMO Low Volatility is currently generating about 0.07 per unit of risk. If you would invest 24,042 in Microsoft on August 28, 2024 and sell it today you would earn a total of 17,837 from holding Microsoft or generate 74.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Microsoft vs. BMO Low Volatility
Performance |
| Timeline |
| Microsoft |
| BMO Low Volatility |
Microsoft and BMO Low Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and BMO Low
The main advantage of trading using opposite Microsoft and BMO Low positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, BMO Low 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 Low will offset losses from the drop in BMO Low's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
| BMO Low vs. BMO Low Volatility | BMO Low vs. BMO Low Volatility | BMO Low vs. BMO International Dividend | BMO Low vs. BMO International Dividend |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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