Correlation Between BMO Mid and CI 1
Can any of the company-specific risk be diversified away by investing in both BMO Mid and CI 1 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 Mid and CI 1 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Mid Corporate and CI 1 5 Year, you can compare the effects of market volatilities on BMO Mid and CI 1 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 Mid with a short position of CI 1. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Mid and CI 1.
Diversification Opportunities for BMO Mid and CI 1
Very poor diversification
The 3 months correlation between BMO and BXF is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding BMO Mid Corporate and CI 1 5 Year in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CI 1 5 and BMO Mid 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 Mid Corporate are associated (or correlated) with CI 1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CI 1 5 has no effect on the direction of BMO Mid i.e., BMO Mid and CI 1 go up and down completely randomly.
Pair Corralation between BMO Mid and CI 1
Assuming the 90 days trading horizon BMO Mid Corporate is expected to generate 1.46 times more return on investment than CI 1. However, BMO Mid is 1.46 times more volatile than CI 1 5 Year. It trades about 0.1 of its potential returns per unit of risk. CI 1 5 Year is currently generating about 0.04 per unit of risk. If you would invest 1,539 in BMO Mid Corporate on September 3, 2024 and sell it today you would earn a total of 21.00 from holding BMO Mid Corporate or generate 1.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Mid Corporate vs. CI 1 5 Year
Performance |
| Timeline |
| BMO Mid Corporate |
| CI 1 5 |
BMO Mid and CI 1 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Mid and CI 1
The main advantage of trading using opposite BMO Mid and CI 1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Mid position performs unexpectedly, CI 1 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 CI 1 will offset losses from the drop in CI 1's long position.| BMO Mid vs. BMO Long Corporate | BMO Mid vs. BMO Short Corporate | BMO Mid vs. BMO High Yield | BMO Mid vs. BMO Short Provincial |
| CI 1 vs. BMO Short Federal | CI 1 vs. BMO Short Corporate | CI 1 vs. BMO Mid Corporate | CI 1 vs. BMO Long 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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