Correlation Between BMO Equal and Hamilton Canadian
Can any of the company-specific risk be diversified away by investing in both BMO Equal and Hamilton Canadian 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 Equal and Hamilton Canadian into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Equal Weight and Hamilton Canadian Bank, you can compare the effects of market volatilities on BMO Equal and Hamilton Canadian 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 Equal with a short position of Hamilton Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Equal and Hamilton Canadian.
Diversification Opportunities for BMO Equal and Hamilton Canadian
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BMO and Hamilton is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding BMO Equal Weight and Hamilton Canadian Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hamilton Canadian Bank and BMO Equal 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 Equal Weight are associated (or correlated) with Hamilton Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hamilton Canadian Bank has no effect on the direction of BMO Equal i.e., BMO Equal and Hamilton Canadian go up and down completely randomly.
Pair Corralation between BMO Equal and Hamilton Canadian
Assuming the 90 days trading horizon BMO Equal Weight is expected to generate 4.75 times more return on investment than Hamilton Canadian. However, BMO Equal is 4.75 times more volatile than Hamilton Canadian Bank. It trades about 0.25 of its potential returns per unit of risk. Hamilton Canadian Bank is currently generating about 0.22 per unit of risk. If you would invest 3,200 in BMO Equal Weight on August 29, 2024 and sell it today you would earn a total of 816.00 from holding BMO Equal Weight or generate 25.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Equal Weight vs. Hamilton Canadian Bank
Performance |
| Timeline |
| BMO Equal Weight |
| Hamilton Canadian Bank |
BMO Equal and Hamilton Canadian Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Equal and Hamilton Canadian
The main advantage of trading using opposite BMO Equal and Hamilton Canadian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Equal position performs unexpectedly, Hamilton Canadian 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 Hamilton Canadian will offset losses from the drop in Hamilton Canadian's long position.| BMO Equal vs. BMO Short Term Bond | BMO Equal vs. BMO Canadian Bank | BMO Equal vs. BMO Aggregate Bond | BMO Equal vs. BMO Balanced ETF |
| Hamilton Canadian vs. BMO Global High | Hamilton Canadian vs. BMO Covered Call | Hamilton Canadian vs. BMO Europe High | Hamilton Canadian vs. Forstrong Global Income |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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