Correlation Between BMO Canadian and Accelerate Absolute
Can any of the company-specific risk be diversified away by investing in both BMO Canadian and Accelerate Absolute 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 Absolute 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 Absolute Return, you can compare the effects of market volatilities on BMO Canadian and Accelerate Absolute 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 Absolute. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Canadian and Accelerate Absolute.
Diversification Opportunities for BMO Canadian and Accelerate Absolute
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BMO and Accelerate is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding BMO Canadian Bank and Accelerate Absolute Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Accelerate Absolute 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 Absolute. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Accelerate Absolute has no effect on the direction of BMO Canadian i.e., BMO Canadian and Accelerate Absolute go up and down completely randomly.
Pair Corralation between BMO Canadian and Accelerate Absolute
Assuming the 90 days trading horizon BMO Canadian is expected to generate 6.13 times less return on investment than Accelerate Absolute. But when comparing it to its historical volatility, BMO Canadian Bank is 12.04 times less risky than Accelerate Absolute. It trades about 0.27 of its potential returns per unit of risk. Accelerate Absolute Return is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 2,716 in Accelerate Absolute Return on September 1, 2024 and sell it today you would earn a total of 107.00 from holding Accelerate Absolute Return or generate 3.94% 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 Absolute Return
Performance |
| Timeline |
| BMO Canadian Bank |
| Accelerate Absolute |
BMO Canadian and Accelerate Absolute Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Canadian and Accelerate Absolute
The main advantage of trading using opposite BMO Canadian and Accelerate Absolute positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Canadian position performs unexpectedly, Accelerate Absolute 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 Absolute will offset losses from the drop in Accelerate Absolute'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 |
| Accelerate Absolute vs. Accelerate Arbitrage | Accelerate Absolute vs. Accelerate OneChoice Alternative | Accelerate Absolute vs. NBI High Yield | Accelerate Absolute vs. NBI Unconstrained Fixed |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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