Correlation Between BMO SIA and BMO Mid
Can any of the company-specific risk be diversified away by investing in both BMO SIA and BMO Mid 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 SIA and BMO Mid into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO SIA Focused and BMO Mid Federal, you can compare the effects of market volatilities on BMO SIA and BMO Mid 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 SIA with a short position of BMO Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO SIA and BMO Mid.
Diversification Opportunities for BMO SIA and BMO Mid
Excellent diversification
The 3 months correlation between BMO and BMO is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding BMO SIA Focused and BMO Mid Federal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Mid Federal and BMO SIA 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 SIA Focused are associated (or correlated) with BMO Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Mid Federal has no effect on the direction of BMO SIA i.e., BMO SIA and BMO Mid go up and down completely randomly.
Pair Corralation between BMO SIA and BMO Mid
Assuming the 90 days trading horizon BMO SIA Focused is expected to generate 1.89 times more return on investment than BMO Mid. However, BMO SIA is 1.89 times more volatile than BMO Mid Federal. It trades about 0.43 of its potential returns per unit of risk. BMO Mid Federal is currently generating about 0.13 per unit of risk. If you would invest 5,281 in BMO SIA Focused on September 4, 2024 and sell it today you would earn a total of 399.00 from holding BMO SIA Focused or generate 7.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO SIA Focused vs. BMO Mid Federal
Performance |
| Timeline |
| BMO SIA Focused |
| BMO Mid Federal |
BMO SIA and BMO Mid Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO SIA and BMO Mid
The main advantage of trading using opposite BMO SIA and BMO Mid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO SIA position performs unexpectedly, BMO Mid 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 Mid will offset losses from the drop in BMO Mid's long position.| BMO SIA vs. BMO SIA Focused | BMO SIA vs. BMO MSCI USA | BMO SIA vs. BMO Low Volatility | BMO SIA vs. BMO Dividend CAD |
| BMO Mid vs. BMO Short Corporate | BMO Mid vs. BMO High Yield | BMO Mid vs. iShares Core Canadian | BMO Mid vs. Harvest Global REIT |
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 CEOs Directory module to screen CEOs from public companies around the world.
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