Correlation Between BMO Global and Dow Jones
Can any of the company-specific risk be diversified away by investing in both BMO Global and Dow Jones 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 BMO Global and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Global Consumer and Dow Jones Industrial, you can compare the effects of market volatilities on BMO Global and Dow Jones 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 BMO Global with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Global and Dow Jones.
Diversification Opportunities for BMO Global and Dow Jones
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between BMO and Dow is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding BMO Global Consumer and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and BMO Global 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 BMO Global Consumer are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of BMO Global i.e., BMO Global and Dow Jones go up and down completely randomly.
Pair Corralation between BMO Global and Dow Jones
Assuming the 90 days trading horizon BMO Global is expected to generate 10.14 times less return on investment than Dow Jones. But when comparing it to its historical volatility, BMO Global Consumer is 1.91 times less risky than Dow Jones. It trades about 0.07 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 4,179,460 in Dow Jones Industrial on September 5, 2024 and sell it today you would earn a total of 321,944 from holding Dow Jones Industrial or generate 7.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
BMO Global Consumer vs. Dow Jones Industrial
Performance |
| Timeline |
BMO Global and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
BMO Global Consumer
Pair trading matchups for BMO Global
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with BMO Global and Dow Jones
The main advantage of trading using opposite BMO Global and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Global position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| BMO Global vs. International Zeolite Corp | BMO Global vs. European Residential Real | BMO Global vs. Financial 15 Split | BMO Global vs. Rubicon Organics |
| Dow Jones vs. Shake Shack | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. Dave Busters Entertainment | Dow Jones vs. Meli Hotels International |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
Other Complementary Tools
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. |