Correlation Between BMO Mid and BMO Short
Can any of the company-specific risk be diversified away by investing in both BMO Mid and BMO Short 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 Mid and BMO Short into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Mid Federal and BMO Short Federal, you can compare the effects of market volatilities on BMO Mid and BMO Short 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 Mid with a short position of BMO Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Mid and BMO Short.
Diversification Opportunities for BMO Mid and BMO Short
Very weak diversification
The 3 months correlation between BMO and BMO is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding BMO Mid Federal and BMO Short Federal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Short Federal and BMO Mid 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 Mid Federal are associated (or correlated) with BMO Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Short Federal has no effect on the direction of BMO Mid i.e., BMO Mid and BMO Short go up and down completely randomly.
Pair Corralation between BMO Mid and BMO Short
Assuming the 90 days trading horizon BMO Mid Federal is expected to generate 3.32 times more return on investment than BMO Short. However, BMO Mid is 3.32 times more volatile than BMO Short Federal. It trades about 0.0 of its potential returns per unit of risk. BMO Short Federal is currently generating about -0.06 per unit of risk. If you would invest 1,461 in BMO Mid Federal on August 29, 2024 and sell it today you would earn a total of 0.00 from holding BMO Mid Federal or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Mid Federal vs. BMO Short Federal
Performance |
| Timeline |
| BMO Mid Federal |
| BMO Short Federal |
BMO Mid and BMO Short Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Mid and BMO Short
The main advantage of trading using opposite BMO Mid and BMO Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Mid position performs unexpectedly, BMO Short 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 Short will offset losses from the drop in BMO Short's long position.| BMO Mid vs. Mackenzie Core Plus | BMO Mid vs. Mackenzie Unconstrained Bond | BMO Mid vs. Mackenzie Floating Rate | BMO Mid vs. Mackenzie Canadian Short |
| BMO Short vs. BMO Short Provincial | BMO Short vs. BMO Short Corporate | BMO Short vs. BMO Mid Federal | BMO Short vs. BMO Mid Corporate |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
Other Complementary Tools
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Share Portfolio Track or share privately all of your investments from the convenience of any device | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data |