Correlation Between First Asset and BMO Covered
Can any of the company-specific risk be diversified away by investing in both First Asset and BMO Covered 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 First Asset and BMO Covered into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Asset Tech and BMO Covered Call, you can compare the effects of market volatilities on First Asset and BMO Covered 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 First Asset with a short position of BMO Covered. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Asset and BMO Covered.
Diversification Opportunities for First Asset and BMO Covered
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and BMO is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding First Asset Tech and BMO Covered Call in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Covered Call and First Asset 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 First Asset Tech are associated (or correlated) with BMO Covered. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Covered Call has no effect on the direction of First Asset i.e., First Asset and BMO Covered go up and down completely randomly.
Pair Corralation between First Asset and BMO Covered
Assuming the 90 days trading horizon First Asset Tech is expected to under-perform the BMO Covered. But the etf apears to be less risky and, when comparing its historical volatility, First Asset Tech is 1.64 times less risky than BMO Covered. The etf trades about -0.05 of its potential returns per unit of risk. The BMO Covered Call is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 2,364 in BMO Covered Call on August 30, 2024 and sell it today you would earn a total of 260.00 from holding BMO Covered Call or generate 11.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Asset Tech vs. BMO Covered Call
Performance |
| Timeline |
| First Asset Tech |
| BMO Covered Call |
First Asset and BMO Covered Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Asset and BMO Covered
The main advantage of trading using opposite First Asset and BMO Covered positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Asset position performs unexpectedly, BMO Covered 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 Covered will offset losses from the drop in BMO Covered's long position.| First Asset vs. BMO Covered Call | First Asset vs. BMO Canadian High | First Asset vs. BMO Europe High | First Asset vs. Harvest Healthcare Leaders |
| BMO Covered vs. BMO Global High | BMO Covered vs. BMO Covered Call | BMO Covered vs. BMO Europe High | BMO Covered vs. Forstrong Global Income |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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