Correlation Between BMO International and BMO Canadian
Can any of the company-specific risk be diversified away by investing in both BMO International and BMO 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 International and BMO Canadian 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 BMO Canadian Dividend, you can compare the effects of market volatilities on BMO International and BMO 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 International with a short position of BMO Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO International and BMO Canadian.
Diversification Opportunities for BMO International and BMO Canadian
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between BMO and BMO is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding BMO International Dividend and BMO Canadian Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Canadian Dividend 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 BMO Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Canadian Dividend has no effect on the direction of BMO International i.e., BMO International and BMO Canadian go up and down completely randomly.
Pair Corralation between BMO International and BMO Canadian
Assuming the 90 days trading horizon BMO International Dividend is expected to under-perform the BMO Canadian. In addition to that, BMO International is 1.77 times more volatile than BMO Canadian Dividend. It trades about -0.25 of its total potential returns per unit of risk. BMO Canadian Dividend is currently generating about 0.18 per unit of volatility. If you would invest 2,243 in BMO Canadian Dividend on August 28, 2024 and sell it today you would earn a total of 39.00 from holding BMO Canadian Dividend or generate 1.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO International Dividend vs. BMO Canadian Dividend
Performance |
| Timeline |
| BMO International |
| BMO Canadian Dividend |
BMO International and BMO Canadian Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO International and BMO Canadian
The main advantage of trading using opposite BMO International and BMO Canadian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO International position performs unexpectedly, BMO 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 BMO Canadian will offset losses from the drop in BMO Canadian's long position.| BMO International vs. Vanguard FTSE Developed | BMO International vs. BMO MSCI EAFE | BMO International vs. BMO Low Volatility |
| BMO Canadian vs. iShares Diversified Monthly | BMO Canadian vs. iShares SPTSX Capped | BMO Canadian vs. iShares SPTSX Capped |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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