Correlation Between BMO Short and CI 1
Can any of the company-specific risk be diversified away by investing in both BMO Short and CI 1 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 Short and CI 1 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Short Federal and CI 1 5 Year, you can compare the effects of market volatilities on BMO Short and CI 1 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 Short with a short position of CI 1. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Short and CI 1.
Diversification Opportunities for BMO Short and CI 1
Almost no diversification
The 3 months correlation between BMO and BXF is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding BMO Short Federal and CI 1 5 Year in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CI 1 5 and BMO Short 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 Short Federal are associated (or correlated) with CI 1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CI 1 5 has no effect on the direction of BMO Short i.e., BMO Short and CI 1 go up and down completely randomly.
Pair Corralation between BMO Short and CI 1
Assuming the 90 days trading horizon BMO Short is expected to generate 1.18 times less return on investment than CI 1. But when comparing it to its historical volatility, BMO Short Federal is 1.36 times less risky than CI 1. It trades about 0.08 of its potential returns per unit of risk. CI 1 5 Year is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 935.00 in CI 1 5 Year on September 3, 2024 and sell it today you would earn a total of 82.00 from holding CI 1 5 Year or generate 8.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Short Federal vs. CI 1 5 Year
Performance |
| Timeline |
| BMO Short Federal |
| CI 1 5 |
BMO Short and CI 1 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Short and CI 1
The main advantage of trading using opposite BMO Short and CI 1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Short position performs unexpectedly, CI 1 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 CI 1 will offset losses from the drop in CI 1's long position.| BMO Short vs. BMO Short Provincial | BMO Short vs. BMO Short Corporate | BMO Short vs. BMO Mid Federal | BMO Short vs. BMO Mid Corporate |
| CI 1 vs. BMO Short Federal | CI 1 vs. BMO Short Corporate | CI 1 vs. BMO Mid Corporate | CI 1 vs. BMO Long 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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