Correlation Between BMO Discount and Desjardins
Can any of the company-specific risk be diversified away by investing in both BMO Discount and Desjardins 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 Discount and Desjardins into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Discount Bond and Desjardins RI Active, you can compare the effects of market volatilities on BMO Discount and Desjardins 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 Discount with a short position of Desjardins. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Discount and Desjardins.
Diversification Opportunities for BMO Discount and Desjardins
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between BMO and Desjardins is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding BMO Discount Bond and Desjardins RI Active in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Desjardins RI Active and BMO Discount 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 Discount Bond are associated (or correlated) with Desjardins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Desjardins RI Active has no effect on the direction of BMO Discount i.e., BMO Discount and Desjardins go up and down completely randomly.
Pair Corralation between BMO Discount and Desjardins
Assuming the 90 days trading horizon BMO Discount is expected to generate 1.74 times less return on investment than Desjardins. But when comparing it to its historical volatility, BMO Discount Bond is 1.15 times less risky than Desjardins. It trades about 0.09 of its potential returns per unit of risk. Desjardins RI Active is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 1,862 in Desjardins RI Active on August 30, 2024 and sell it today you would earn a total of 24.00 from holding Desjardins RI Active or generate 1.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Discount Bond vs. Desjardins RI Active
Performance |
| Timeline |
| BMO Discount Bond |
| Desjardins RI Active |
BMO Discount and Desjardins Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Discount and Desjardins
The main advantage of trading using opposite BMO Discount and Desjardins positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Discount position performs unexpectedly, Desjardins 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 Desjardins will offset losses from the drop in Desjardins' long position.| BMO Discount vs. Vanguard Canadian Short | BMO Discount vs. BMO Aggregate Bond | BMO Discount vs. BMO Short Corporate | BMO Discount vs. CI 1 5 Year |
| Desjardins vs. BMO Aggregate Bond | Desjardins vs. iShares Canadian Universe | Desjardins vs. BMO Core Plus | Desjardins vs. BMO Discount 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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