Correlation Between Wealthsimple North and BMO Long
Can any of the company-specific risk be diversified away by investing in both Wealthsimple North and BMO Long 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 Long 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 Long Provincial, you can compare the effects of market volatilities on Wealthsimple North and BMO Long 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 Long. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wealthsimple North and BMO Long.
Diversification Opportunities for Wealthsimple North and BMO Long
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Wealthsimple and BMO is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Wealthsimple North America and BMO Long Provincial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Long Provincial 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 Long. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Long Provincial has no effect on the direction of Wealthsimple North i.e., Wealthsimple North and BMO Long go up and down completely randomly.
Pair Corralation between Wealthsimple North and BMO Long
Assuming the 90 days trading horizon Wealthsimple North America is expected to generate 0.74 times more return on investment than BMO Long. However, Wealthsimple North America is 1.35 times less risky than BMO Long. It trades about 0.18 of its potential returns per unit of risk. BMO Long Provincial is currently generating about 0.03 per unit of risk. If you would invest 3,580 in Wealthsimple North America on August 29, 2024 and sell it today you would earn a total of 965.00 from holding Wealthsimple North America or generate 26.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wealthsimple North America vs. BMO Long Provincial
Performance |
| Timeline |
| Wealthsimple North |
| BMO Long Provincial |
Wealthsimple North and BMO Long Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wealthsimple North and BMO Long
The main advantage of trading using opposite Wealthsimple North and BMO Long positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wealthsimple North position performs unexpectedly, BMO Long 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 Long will offset losses from the drop in BMO Long'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 Long vs. BMO Long Corporate | BMO Long vs. BMO Short Provincial | BMO Long vs. BMO Mid Provincial | BMO Long vs. BMO Mid 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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