Correlation Between BMO Emerging and BMO Long
Can any of the company-specific risk be diversified away by investing in both BMO Emerging and BMO Long 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 Emerging and BMO Long into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Emerging Markets and BMO Long Federal, you can compare the effects of market volatilities on BMO Emerging and BMO Long 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 Emerging with a short position of BMO Long. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Emerging and BMO Long.
Diversification Opportunities for BMO Emerging and BMO Long
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BMO and BMO is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding BMO Emerging Markets and BMO Long Federal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Long Federal and BMO Emerging 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 Emerging Markets are associated (or correlated) with BMO Long. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Long Federal has no effect on the direction of BMO Emerging i.e., BMO Emerging and BMO Long go up and down completely randomly.
Pair Corralation between BMO Emerging and BMO Long
Assuming the 90 days trading horizon BMO Emerging Markets is expected to generate 0.52 times more return on investment than BMO Long. However, BMO Emerging Markets is 1.92 times less risky than BMO Long. It trades about 0.06 of its potential returns per unit of risk. BMO Long Federal is currently generating about 0.01 per unit of risk. If you would invest 1,066 in BMO Emerging Markets on September 12, 2024 and sell it today you would earn a total of 172.00 from holding BMO Emerging Markets or generate 16.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Emerging Markets vs. BMO Long Federal
Performance |
| Timeline |
| BMO Emerging Markets |
| BMO Long Federal |
BMO Emerging and BMO Long Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Emerging and BMO Long
The main advantage of trading using opposite BMO Emerging and BMO Long positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Emerging position performs unexpectedly, BMO Long 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 Long will offset losses from the drop in BMO Long's long position.| BMO Emerging vs. BMO High Yield | BMO Emerging vs. BMO Mid Corporate | BMO Emerging vs. BMO Long Corporate | BMO Emerging vs. BMO Short Provincial |
| BMO Long vs. iShares MSCI Emerging | BMO Long vs. iShares MSCI Global | BMO Long vs. iShares Core Canadian | BMO Long vs. Vanguard Total Market |
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 Positions Ratings module to 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.
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