Correlation Between Visa and BMO Mid
Can any of the company-specific risk be diversified away by investing in both Visa and BMO Mid 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 Mid 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 Mid Term IG, you can compare the effects of market volatilities on Visa and BMO Mid 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 Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and BMO Mid.
Diversification Opportunities for Visa and BMO Mid
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 Mid Term IG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Mid Term 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 Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Mid Term has no effect on the direction of Visa i.e., Visa and BMO Mid go up and down completely randomly.
Pair Corralation between Visa and BMO Mid
Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.99 times more return on investment than BMO Mid. However, Visa is 1.99 times more volatile than BMO Mid Term IG. It trades about 0.45 of its potential returns per unit of risk. BMO Mid Term IG is currently generating about 0.06 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 Mid Term IG
Performance |
| Timeline |
| Visa Class A |
| BMO Mid Term |
Visa and BMO Mid Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and BMO Mid
The main advantage of trading using opposite Visa and BMO Mid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, BMO Mid 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 Mid will offset losses from the drop in BMO Mid's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| BMO Mid vs. BMO Mid Term IG | BMO Mid vs. BMO Mid Corporate | BMO Mid vs. CI Canadian Banks | BMO Mid vs. BMO Long 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
Other Complementary Tools
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas |