Correlation Between BMO Canadian and Accelerate Arbitrage
Can any of the company-specific risk be diversified away by investing in both BMO Canadian and Accelerate Arbitrage 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 BMO Canadian and Accelerate Arbitrage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Canadian Bank and Accelerate Arbitrage, you can compare the effects of market volatilities on BMO Canadian and Accelerate Arbitrage 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 BMO Canadian with a short position of Accelerate Arbitrage. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Canadian and Accelerate Arbitrage.
Diversification Opportunities for BMO Canadian and Accelerate Arbitrage
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BMO and Accelerate is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding BMO Canadian Bank and Accelerate Arbitrage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Accelerate Arbitrage and BMO Canadian 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 BMO Canadian Bank are associated (or correlated) with Accelerate Arbitrage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Accelerate Arbitrage has no effect on the direction of BMO Canadian i.e., BMO Canadian and Accelerate Arbitrage go up and down completely randomly.
Pair Corralation between BMO Canadian and Accelerate Arbitrage
Assuming the 90 days trading horizon BMO Canadian Bank is expected to generate 0.47 times more return on investment than Accelerate Arbitrage. However, BMO Canadian Bank is 2.12 times less risky than Accelerate Arbitrage. It trades about 0.21 of its potential returns per unit of risk. Accelerate Arbitrage is currently generating about 0.05 per unit of risk. If you would invest 2,888 in BMO Canadian Bank on September 3, 2024 and sell it today you would earn a total of 148.00 from holding BMO Canadian Bank or generate 5.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Canadian Bank vs. Accelerate Arbitrage
Performance |
| Timeline |
| BMO Canadian Bank |
| Accelerate Arbitrage |
BMO Canadian and Accelerate Arbitrage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Canadian and Accelerate Arbitrage
The main advantage of trading using opposite BMO Canadian and Accelerate Arbitrage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Canadian position performs unexpectedly, Accelerate Arbitrage 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 Accelerate Arbitrage will offset losses from the drop in Accelerate Arbitrage's long position.| BMO Canadian vs. BMO Short Term Bond | BMO Canadian vs. BMO Aggregate Bond | BMO Canadian vs. BMO Balanced ETF | BMO Canadian vs. BMO Aggregate 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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