Correlation Between BMO Global and BMO Sustainable
Can any of the company-specific risk be diversified away by investing in both BMO Global and BMO Sustainable 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 BMO Sustainable into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Global Strategic and BMO Sustainable Global, you can compare the effects of market volatilities on BMO Global and BMO Sustainable 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 BMO Sustainable. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Global and BMO Sustainable.
Diversification Opportunities for BMO Global and BMO Sustainable
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BMO and BMO is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding BMO Global Strategic and BMO Sustainable Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Sustainable Global 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 Strategic are associated (or correlated) with BMO Sustainable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Sustainable Global has no effect on the direction of BMO Global i.e., BMO Global and BMO Sustainable go up and down completely randomly.
Pair Corralation between BMO Global and BMO Sustainable
Assuming the 90 days trading horizon BMO Global Strategic is expected to generate 0.64 times more return on investment than BMO Sustainable. However, BMO Global Strategic is 1.57 times less risky than BMO Sustainable. It trades about 0.16 of its potential returns per unit of risk. BMO Sustainable Global is currently generating about 0.06 per unit of risk. If you would invest 2,710 in BMO Global Strategic on November 27, 2024 and sell it today you would earn a total of 28.00 from holding BMO Global Strategic or generate 1.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Global Strategic vs. BMO Sustainable Global
Performance |
| Timeline |
| BMO Global Strategic |
| BMO Sustainable Global |
BMO Global and BMO Sustainable Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Global and BMO Sustainable
The main advantage of trading using opposite BMO Global and BMO Sustainable positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Global position performs unexpectedly, BMO Sustainable 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 Sustainable will offset losses from the drop in BMO Sustainable's long position.| BMO Global vs. BMO Sustainable Global | BMO Global vs. BMO Corporate Bond | BMO Global vs. BMO Core Plus | BMO Global vs. BMO Long Provincial |
| BMO Sustainable vs. BMO Global Strategic | BMO Sustainable vs. BMO Core Plus | BMO Sustainable vs. BMO Corporate Bond | BMO Sustainable vs. BMO Government Bond |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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