Correlation Between Scotia Equity and BMO Low
Can any of the company-specific risk be diversified away by investing in both Scotia Equity 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 Scotia Equity and BMO Low into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Scotia Equity Index and BMO Low Volatility, you can compare the effects of market volatilities on Scotia Equity 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 Scotia Equity with a short position of BMO Low. Check out your portfolio center. Please also check ongoing floating volatility patterns of Scotia Equity and BMO Low.
Diversification Opportunities for Scotia Equity and BMO Low
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Scotia and BMO is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Scotia Equity Index 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 Scotia Equity 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 Scotia Equity Index 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 Scotia Equity i.e., Scotia Equity and BMO Low go up and down completely randomly.
Pair Corralation between Scotia Equity and BMO Low
Assuming the 90 days trading horizon Scotia Equity Index is expected to generate 1.34 times more return on investment than BMO Low. However, Scotia Equity is 1.34 times more volatile than BMO Low Volatility. It trades about 0.13 of its potential returns per unit of risk. BMO Low Volatility is currently generating about 0.01 per unit of risk. If you would invest 3,879 in Scotia Equity Index on October 21, 2024 and sell it today you would earn a total of 76.00 from holding Scotia Equity Index or generate 1.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Scotia Equity Index vs. BMO Low Volatility
Performance |
| Timeline |
| Scotia Equity Index |
| BMO Low Volatility |
Scotia Equity and BMO Low Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Scotia Equity and BMO Low
The main advantage of trading using opposite Scotia Equity and BMO Low positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scotia Equity 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.| Scotia Equity vs. Scotia International Equity | Scotia Equity vs. Scotia Responsible Investing | Scotia Equity vs. Scotia Canadian Bond | Scotia Equity vs. NBI High Yield |
| BMO Low vs. BMO Low Volatility | BMO Low vs. BMO Low Volatility | BMO Low vs. BMO Low Volatility | BMO Low vs. BMO Dividend CAD |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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