Correlation Between Wealthsimple North and BMO Government
Can any of the company-specific risk be diversified away by investing in both Wealthsimple North and BMO Government 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 Wealthsimple North and BMO Government into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wealthsimple North America and BMO Government Bond, you can compare the effects of market volatilities on Wealthsimple North and BMO Government 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 Wealthsimple North with a short position of BMO Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wealthsimple North and BMO Government.
Diversification Opportunities for Wealthsimple North and BMO Government
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Wealthsimple and BMO is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Wealthsimple North America and BMO Government Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Government Bond and Wealthsimple North 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 Wealthsimple North America are associated (or correlated) with BMO Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Government Bond has no effect on the direction of Wealthsimple North i.e., Wealthsimple North and BMO Government go up and down completely randomly.
Pair Corralation between Wealthsimple North and BMO Government
Assuming the 90 days trading horizon Wealthsimple North America is expected to under-perform the BMO Government. In addition to that, Wealthsimple North is 1.57 times more volatile than BMO Government Bond. It trades about -0.04 of its total potential returns per unit of risk. BMO Government Bond is currently generating about 0.07 per unit of volatility. If you would invest 4,574 in BMO Government Bond on November 27, 2024 and sell it today you would earn a total of 76.00 from holding BMO Government Bond or generate 1.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wealthsimple North America vs. BMO Government Bond
Performance |
| Timeline |
| Wealthsimple North |
| BMO Government Bond |
Wealthsimple North and BMO Government Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wealthsimple North and BMO Government
The main advantage of trading using opposite Wealthsimple North and BMO Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wealthsimple North position performs unexpectedly, BMO Government 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 Government will offset losses from the drop in BMO Government's long position.| Wealthsimple North vs. Wealthsimple Developed Markets | Wealthsimple North vs. BMO Mid Provincial | Wealthsimple North vs. BMO Long Federal | Wealthsimple North vs. BMO Government Bond |
| BMO Government vs. BMO Corporate Bond | BMO Government vs. BMO Short Federal | BMO Government vs. BMO Short Provincial | BMO Government vs. BMO Mid Term IG |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
Other Complementary Tools
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance |