Correlation Between Microsoft and BMO Equal
Can any of the company-specific risk be diversified away by investing in both Microsoft and BMO Equal 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 Equal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and BMO Equal Weight, you can compare the effects of market volatilities on Microsoft and BMO Equal 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 Equal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and BMO Equal.
Diversification Opportunities for Microsoft and BMO Equal
Good diversification
The 3 months correlation between Microsoft and BMO is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and BMO Equal Weight in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Equal Weight 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 Equal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Equal Weight has no effect on the direction of Microsoft i.e., Microsoft and BMO Equal go up and down completely randomly.
Pair Corralation between Microsoft and BMO Equal
Given the investment horizon of 90 days Microsoft is expected to generate 1.89 times less return on investment than BMO Equal. But when comparing it to its historical volatility, Microsoft is 1.19 times less risky than BMO Equal. It trades about 0.07 of its potential returns per unit of risk. BMO Equal Weight is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 1,851 in BMO Equal Weight on August 29, 2024 and sell it today you would earn a total of 1,719 from holding BMO Equal Weight or generate 92.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.75% |
| Values | Daily Returns |
Microsoft vs. BMO Equal Weight
Performance |
| Timeline |
| Microsoft |
| BMO Equal Weight |
Microsoft and BMO Equal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and BMO Equal
The main advantage of trading using opposite Microsoft and BMO Equal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, BMO Equal 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 Equal will offset losses from the drop in BMO Equal's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
| BMO Equal vs. Brompton Global Dividend | BMO Equal vs. Tech Leaders Income | BMO Equal vs. Global Healthcare Income | BMO Equal vs. Brompton European 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
Other Complementary Tools
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing |