Correlation Between BMO High and BMO Monthly
Can any of the company-specific risk be diversified away by investing in both BMO High and BMO Monthly 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 BMO Monthly 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 BMO Monthly Income, you can compare the effects of market volatilities on BMO High and BMO Monthly 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 BMO Monthly. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO High and BMO Monthly.
Diversification Opportunities for BMO High and BMO Monthly
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between BMO and BMO is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding BMO High Yield and BMO Monthly Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Monthly Income 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 BMO Monthly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Monthly Income has no effect on the direction of BMO High i.e., BMO High and BMO Monthly go up and down completely randomly.
Pair Corralation between BMO High and BMO Monthly
Assuming the 90 days trading horizon BMO High is expected to generate 1.47 times less return on investment than BMO Monthly. In addition to that, BMO High is 1.08 times more volatile than BMO Monthly Income. It trades about 0.13 of its total potential returns per unit of risk. BMO Monthly Income is currently generating about 0.21 per unit of volatility. If you would invest 1,454 in BMO Monthly Income on September 1, 2024 and sell it today you would earn a total of 314.00 from holding BMO Monthly Income or generate 21.6% 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. BMO Monthly Income
Performance |
| Timeline |
| BMO High Yield |
| BMO Monthly Income |
BMO High and BMO Monthly Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO High and BMO Monthly
The main advantage of trading using opposite BMO High and BMO Monthly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO High position performs unexpectedly, BMO Monthly 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 Monthly will offset losses from the drop in BMO Monthly's long position.| BMO High vs. BMO Mid Federal | BMO High vs. BMO Short Corporate | BMO High vs. BMO Emerging Markets | BMO High vs. BMO Long Corporate |
| BMO Monthly vs. Vanguard Growth Portfolio | BMO Monthly vs. iShares Core Balanced | BMO Monthly vs. Vanguard All Equity ETF | BMO Monthly vs. iShares Core Growth |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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