Correlation Between Visa and BMO Europe
Can any of the company-specific risk be diversified away by investing in both Visa and BMO Europe 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 Europe 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 Europe High, you can compare the effects of market volatilities on Visa and BMO Europe 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 Europe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and BMO Europe.
Diversification Opportunities for Visa and BMO Europe
-0.82 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Visa and BMO is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and BMO Europe High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Europe High 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 Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Europe High has no effect on the direction of Visa i.e., Visa and BMO Europe go up and down completely randomly.
Pair Corralation between Visa and BMO Europe
Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.54 times more return on investment than BMO Europe. However, Visa is 1.54 times more volatile than BMO Europe High. It trades about 0.35 of its potential returns per unit of risk. BMO Europe High is currently generating about -0.17 per unit of risk. If you would invest 28,929 in Visa Class A on September 1, 2024 and sell it today you would earn a total of 2,579 from holding Visa Class A or generate 8.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 91.3% |
| Values | Daily Returns |
Visa Class A vs. BMO Europe High
Performance |
| Timeline |
| Visa Class A |
| BMO Europe High |
Visa and BMO Europe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and BMO Europe
The main advantage of trading using opposite Visa and BMO Europe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, BMO Europe 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 Europe will offset losses from the drop in BMO Europe's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| BMO Europe vs. BMO Europe High | BMO Europe vs. BMO High Dividend | BMO Europe vs. BMO Covered Call | BMO Europe vs. BMO Global High |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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