Correlation Between BMO Equal and BMO Long
Can any of the company-specific risk be diversified away by investing in both BMO Equal 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 Equal 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 Equal Weight and BMO Long Federal, you can compare the effects of market volatilities on BMO Equal 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 Equal with a short position of BMO Long. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Equal and BMO Long.
Diversification Opportunities for BMO Equal and BMO Long
Pay attention - limited upside
The 3 months correlation between BMO and BMO is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding BMO Equal Weight 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 Equal 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 Equal Weight 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 Equal i.e., BMO Equal and BMO Long go up and down completely randomly.
Pair Corralation between BMO Equal and BMO Long
Assuming the 90 days trading horizon BMO Equal Weight is expected to generate 1.14 times more return on investment than BMO Long. However, BMO Equal is 1.14 times more volatile than BMO Long Federal. It trades about 0.06 of its potential returns per unit of risk. BMO Long Federal is currently generating about 0.0 per unit of risk. If you would invest 5,938 in BMO Equal Weight on August 24, 2024 and sell it today you would earn a total of 1,944 from holding BMO Equal Weight or generate 32.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Equal Weight vs. BMO Long Federal
Performance |
| Timeline |
| BMO Equal Weight |
| BMO Long Federal |
BMO Equal and BMO Long Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Equal and BMO Long
The main advantage of trading using opposite BMO Equal and BMO Long positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Equal 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 Equal vs. iShares SPTSX Capped | BMO Equal vs. iShares SPTSX Global | BMO Equal vs. iShares SPTSX 60 | BMO Equal vs. iShares SPTSX Capped |
| 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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