Correlation Between BMO Global and Desjardins
Can any of the company-specific risk be diversified away by investing in both BMO Global and Desjardins 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 Global and Desjardins into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Global Infrastructure and Desjardins RI Developed, you can compare the effects of market volatilities on BMO Global and Desjardins 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 Global with a short position of Desjardins. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Global and Desjardins.
Diversification Opportunities for BMO Global and Desjardins
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between BMO and Desjardins is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding BMO Global Infrastructure and Desjardins RI Developed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Desjardins RI Developed and BMO Global 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 Global Infrastructure are associated (or correlated) with Desjardins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Desjardins RI Developed has no effect on the direction of BMO Global i.e., BMO Global and Desjardins go up and down completely randomly.
Pair Corralation between BMO Global and Desjardins
Assuming the 90 days trading horizon BMO Global Infrastructure is expected to under-perform the Desjardins. In addition to that, BMO Global is 2.45 times more volatile than Desjardins RI Developed. It trades about -0.01 of its total potential returns per unit of risk. Desjardins RI Developed is currently generating about 0.34 per unit of volatility. If you would invest 2,474 in Desjardins RI Developed on November 28, 2024 and sell it today you would earn a total of 63.00 from holding Desjardins RI Developed or generate 2.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Global Infrastructure vs. Desjardins RI Developed
Performance |
| Timeline |
| BMO Global Infrastructure |
| Desjardins RI Developed |
BMO Global and Desjardins Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Global and Desjardins
The main advantage of trading using opposite BMO Global and Desjardins positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Global position performs unexpectedly, Desjardins 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 Desjardins will offset losses from the drop in Desjardins' long position.| BMO Global vs. BMO Equal Weight | BMO Global vs. BMO Low Volatility | BMO Global vs. BMO Equal Weight | BMO Global vs. BMO MSCI Emerging |
| Desjardins vs. Desjardins American Equity | Desjardins vs. Desjardins RI Canada | Desjardins vs. Desjardins RI Canada | Desjardins vs. Desjardins Canadian 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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