Correlation Between BMO High and Brompton North
Can any of the company-specific risk be diversified away by investing in both BMO High and Brompton North 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 High and Brompton North into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO High Yield and Brompton North American, you can compare the effects of market volatilities on BMO High and Brompton North 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 High with a short position of Brompton North. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO High and Brompton North.
Diversification Opportunities for BMO High and Brompton North
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between BMO and Brompton is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding BMO High Yield and Brompton North American in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brompton North American and BMO High 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 High Yield are associated (or correlated) with Brompton North. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brompton North American has no effect on the direction of BMO High i.e., BMO High and Brompton North go up and down completely randomly.
Pair Corralation between BMO High and Brompton North
Assuming the 90 days trading horizon BMO High is expected to generate 2.78 times less return on investment than Brompton North. But when comparing it to its historical volatility, BMO High Yield is 9.76 times less risky than Brompton North. It trades about 0.11 of its potential returns per unit of risk. Brompton North American is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 1,975 in Brompton North American on September 12, 2024 and sell it today you would earn a total of 399.00 from holding Brompton North American or generate 20.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO High Yield vs. Brompton North American
Performance |
| Timeline |
| BMO High Yield |
| Brompton North American |
BMO High and Brompton North Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO High and Brompton North
The main advantage of trading using opposite BMO High and Brompton North positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO High position performs unexpectedly, Brompton North 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 Brompton North will offset losses from the drop in Brompton North's long position.| BMO High vs. Purpose Premium Yield | BMO High vs. Purpose Monthly Income | BMO High vs. Purpose International Dividend | BMO High vs. Purpose Enhanced Dividend |
| Brompton North vs. BMO Mid Federal | Brompton North vs. BMO High Yield | Brompton North vs. iShares Core Canadian | Brompton North vs. BMO Short 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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