Correlation Between BMO International and BMO Low
Can any of the company-specific risk be diversified away by investing in both BMO International and BMO Low 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 Low 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 Low Volatility, you can compare the effects of market volatilities on BMO International and BMO Low 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 Low. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO International and BMO Low.
Diversification Opportunities for BMO International and BMO Low
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BMO and BMO is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding BMO International Dividend and BMO Low Volatility in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Low Volatility 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 Low. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Low Volatility has no effect on the direction of BMO International i.e., BMO International and BMO Low go up and down completely randomly.
Pair Corralation between BMO International and BMO Low
Assuming the 90 days trading horizon BMO International Dividend is expected to under-perform the BMO Low. In addition to that, BMO International is 1.35 times more volatile than BMO Low Volatility. It trades about -0.07 of its total potential returns per unit of risk. BMO Low Volatility is currently generating about -0.05 per unit of volatility. If you would invest 2,601 in BMO Low Volatility on August 28, 2024 and sell it today you would lose (42.00) from holding BMO Low Volatility or give up 1.61% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO International Dividend vs. BMO Low Volatility
Performance |
| Timeline |
| BMO International |
| BMO Low Volatility |
BMO International and BMO Low Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO International and BMO Low
The main advantage of trading using opposite BMO International and BMO Low positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO International position performs unexpectedly, BMO Low 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 Low will offset losses from the drop in BMO Low's long position.| BMO International vs. BMO Dividend ETF | BMO International vs. BMO International Dividend | BMO International vs. BMO High Dividend | BMO International vs. BMO Europe High |
| BMO Low vs. BMO Low Volatility | BMO Low vs. BMO Low Volatility | BMO Low vs. BMO International Dividend | BMO Low vs. BMO International Dividend |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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