Correlation Between Microsoft and BMO High
Can any of the company-specific risk be diversified away by investing in both Microsoft and BMO High 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 High into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and BMO High Dividend, you can compare the effects of market volatilities on Microsoft and BMO High 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 High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and BMO High.
Diversification Opportunities for Microsoft and BMO High
Weak diversification
The 3 months correlation between Microsoft and BMO is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and BMO High Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO High Dividend 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 High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO High Dividend has no effect on the direction of Microsoft i.e., Microsoft and BMO High go up and down completely randomly.
Pair Corralation between Microsoft and BMO High
Given the investment horizon of 90 days Microsoft is expected to generate 2.55 times more return on investment than BMO High. However, Microsoft is 2.55 times more volatile than BMO High Dividend. It trades about 0.08 of its potential returns per unit of risk. BMO High Dividend is currently generating about 0.11 per unit of risk. If you would invest 25,045 in Microsoft on November 1, 2024 and sell it today you would earn a total of 16,454 from holding Microsoft or generate 65.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.79% |
| Values | Daily Returns |
Microsoft vs. BMO High Dividend
Performance |
| Timeline |
| Microsoft |
| BMO High Dividend |
Microsoft and BMO High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and BMO High
The main advantage of trading using opposite Microsoft and BMO High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, BMO High 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 High will offset losses from the drop in BMO High's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings |
| BMO High vs. BMO Europe High | BMO High vs. BMO Covered Call | BMO High vs. BMO Covered Call | BMO High vs. BMO Europe High |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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