Correlation Between Invesco 1 and BMO Short
Can any of the company-specific risk be diversified away by investing in both Invesco 1 and BMO Short 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 Invesco 1 and BMO Short into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Invesco 1 5 Year and BMO Short Federal, you can compare the effects of market volatilities on Invesco 1 and BMO Short 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 Invesco 1 with a short position of BMO Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco 1 and BMO Short.
Diversification Opportunities for Invesco 1 and BMO Short
Good diversification
The 3 months correlation between Invesco and BMO is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Invesco 1 5 Year and BMO Short Federal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Short Federal and Invesco 1 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 Invesco 1 5 Year are associated (or correlated) with BMO Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Short Federal has no effect on the direction of Invesco 1 i.e., Invesco 1 and BMO Short go up and down completely randomly.
Pair Corralation between Invesco 1 and BMO Short
Assuming the 90 days trading horizon Invesco 1 5 Year is expected to generate 1.7 times more return on investment than BMO Short. However, Invesco 1 is 1.7 times more volatile than BMO Short Federal. It trades about 0.13 of its potential returns per unit of risk. BMO Short Federal is currently generating about -0.03 per unit of risk. If you would invest 1,770 in Invesco 1 5 Year on August 30, 2024 and sell it today you would earn a total of 9.00 from holding Invesco 1 5 Year or generate 0.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Invesco 1 5 Year vs. BMO Short Federal
Performance |
| Timeline |
| Invesco 1 5 |
| BMO Short Federal |
Invesco 1 and BMO Short Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco 1 and BMO Short
The main advantage of trading using opposite Invesco 1 and BMO Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco 1 position performs unexpectedly, BMO Short 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 Short will offset losses from the drop in BMO Short's long position.| Invesco 1 vs. Invesco FTSE RAFI | Invesco 1 vs. iShares 1 10Yr Laddered | Invesco 1 vs. Invesco Fundamental High | Invesco 1 vs. CI Canadian Convertible |
| BMO Short vs. BMO Short Provincial | BMO Short vs. BMO Short Corporate | BMO Short vs. BMO Mid Federal | BMO Short vs. BMO Mid Corporate |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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