Correlation Between Visa and BMO Canadian
Can any of the company-specific risk be diversified away by investing in both Visa and BMO Canadian 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 Visa and BMO Canadian into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visa Class A and BMO Canadian Bank, you can compare the effects of market volatilities on Visa and BMO Canadian 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 Visa with a short position of BMO Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and BMO Canadian.
Diversification Opportunities for Visa and BMO Canadian
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Visa and BMO is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and BMO Canadian Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Canadian Bank and Visa 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 Visa Class A are associated (or correlated) with BMO Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Canadian Bank has no effect on the direction of Visa i.e., Visa and BMO Canadian go up and down completely randomly.
Pair Corralation between Visa and BMO Canadian
Taking into account the 90-day investment horizon Visa Class A is expected to generate 9.07 times more return on investment than BMO Canadian. However, Visa is 9.07 times more volatile than BMO Canadian Bank. It trades about 0.45 of its potential returns per unit of risk. BMO Canadian Bank is currently generating about 0.19 per unit of risk. If you would invest 31,440 in Visa Class A on November 3, 2024 and sell it today you would earn a total of 2,740 from holding Visa Class A or generate 8.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 90.91% |
| Values | Daily Returns |
Visa Class A vs. BMO Canadian Bank
Performance |
| Timeline |
| Visa Class A |
| BMO Canadian Bank |
Visa and BMO Canadian Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and BMO Canadian
The main advantage of trading using opposite Visa and BMO Canadian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, BMO Canadian 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 Canadian will offset losses from the drop in BMO Canadian's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| BMO Canadian vs. BMO Aggregate Bond | BMO Canadian vs. iShares Canadian Universe | BMO Canadian vs. BMO Core Plus | BMO Canadian vs. BMO Discount Bond |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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