Correlation Between BMO Preferred and BMO Put
Can any of the company-specific risk be diversified away by investing in both BMO Preferred and BMO Put 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 Preferred and BMO Put into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Preferred Share and BMO Put Write, you can compare the effects of market volatilities on BMO Preferred and BMO Put 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 Preferred with a short position of BMO Put. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Preferred and BMO Put.
Diversification Opportunities for BMO Preferred and BMO Put
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between BMO and BMO is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding BMO Preferred Share and BMO Put Write in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Put Write and BMO Preferred 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 Preferred Share are associated (or correlated) with BMO Put. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Put Write has no effect on the direction of BMO Preferred i.e., BMO Preferred and BMO Put go up and down completely randomly.
Pair Corralation between BMO Preferred and BMO Put
Assuming the 90 days trading horizon BMO Preferred is expected to generate 9.41 times less return on investment than BMO Put. In addition to that, BMO Preferred is 1.73 times more volatile than BMO Put Write. It trades about 0.01 of its total potential returns per unit of risk. BMO Put Write is currently generating about 0.11 per unit of volatility. If you would invest 1,250 in BMO Put Write on September 1, 2024 and sell it today you would earn a total of 378.00 from holding BMO Put Write or generate 30.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Preferred Share vs. BMO Put Write
Performance |
| Timeline |
| BMO Preferred Share |
| BMO Put Write |
BMO Preferred and BMO Put Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Preferred and BMO Put
The main advantage of trading using opposite BMO Preferred and BMO Put positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Preferred position performs unexpectedly, BMO Put 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 Put will offset losses from the drop in BMO Put's long position.| BMO Preferred vs. BMO Covered Call | BMO Preferred vs. Forstrong Global Income | BMO Preferred vs. BMO Aggregate Bond | BMO Preferred vs. iShares Canadian HYBrid |
| BMO Put vs. BMO Put Write | BMO Put vs. BMO Europe High | BMO Put vs. BMO High Dividend | BMO Put vs. BMO Europe High |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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