Correlation Between BMO International and Dow Jones
Can any of the company-specific risk be diversified away by investing in both BMO International and Dow Jones 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 International and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO International Dividend and Dow Jones Industrial, you can compare the effects of market volatilities on BMO International and Dow Jones 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 International with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO International and Dow Jones.
Diversification Opportunities for BMO International and Dow Jones
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between BMO and Dow is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding BMO International Dividend and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and BMO International 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 International Dividend are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of BMO International i.e., BMO International and Dow Jones go up and down completely randomly.
Pair Corralation between BMO International and Dow Jones
Assuming the 90 days trading horizon BMO International Dividend is expected to under-perform the Dow Jones. But the etf apears to be less risky and, when comparing its historical volatility, BMO International Dividend is 1.18 times less risky than Dow Jones. The etf trades about -0.06 of its potential returns per unit of risk. The Dow Jones Industrial is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 4,237,436 in Dow Jones Industrial on August 25, 2024 and sell it today you would earn a total of 192,215 from holding Dow Jones Industrial or generate 4.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
BMO International Dividend vs. Dow Jones Industrial
Performance |
| Timeline |
BMO International and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
BMO International Dividend
Pair trading matchups for BMO International
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with BMO International and Dow Jones
The main advantage of trading using opposite BMO International and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO International position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| BMO International vs. iShares Core MSCI | BMO International vs. Vanguard FTSE Developed | BMO International vs. iShares MSCI EAFE | BMO International vs. iShares Core MSCI |
| Dow Jones vs. Vistra Energy Corp | Dow Jones vs. Fluence Energy | Dow Jones vs. Old Republic International | Dow Jones vs. Empresa Distribuidora y |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
Other Complementary Tools
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities |