Correlation Between BMO Short and Goldman Sachs
Can any of the company-specific risk be diversified away by investing in both BMO Short and Goldman Sachs 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 Short and Goldman Sachs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Short Corporate and Goldman Sachs ActiveBeta, you can compare the effects of market volatilities on BMO Short and Goldman Sachs 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 Short with a short position of Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Short and Goldman Sachs.
Diversification Opportunities for BMO Short and Goldman Sachs
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between BMO and Goldman is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding BMO Short Corporate and Goldman Sachs ActiveBeta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs ActiveBeta and BMO Short 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 Short Corporate are associated (or correlated) with Goldman Sachs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goldman Sachs ActiveBeta has no effect on the direction of BMO Short i.e., BMO Short and Goldman Sachs go up and down completely randomly.
Pair Corralation between BMO Short and Goldman Sachs
Assuming the 90 days trading horizon BMO Short is expected to generate 1.71 times less return on investment than Goldman Sachs. But when comparing it to its historical volatility, BMO Short Corporate is 3.37 times less risky than Goldman Sachs. It trades about 0.23 of its potential returns per unit of risk. Goldman Sachs ActiveBeta is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 5,132 in Goldman Sachs ActiveBeta on November 27, 2024 and sell it today you would earn a total of 56.00 from holding Goldman Sachs ActiveBeta or generate 1.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Short Corporate vs. Goldman Sachs ActiveBeta
Performance |
| Timeline |
| BMO Short Corporate |
| Goldman Sachs ActiveBeta |
BMO Short and Goldman Sachs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Short and Goldman Sachs
The main advantage of trading using opposite BMO Short and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Short position performs unexpectedly, Goldman Sachs 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 Goldman Sachs will offset losses from the drop in Goldman Sachs' long position.| BMO Short vs. BMO Long Federal | BMO Short vs. BMO Mid Federal | BMO Short vs. BMO Mid Corporate | BMO Short vs. BMO High Yield |
| Goldman Sachs vs. Mackenzie Canadian Equity | Goldman Sachs vs. Mackenzie Large Cap | Goldman Sachs vs. BMO MSCI EAFE | Goldman Sachs vs. BMO Long Federal |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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