Correlation Between BMO High and Purpose Premium
Can any of the company-specific risk be diversified away by investing in both BMO High and Purpose Premium 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 Purpose Premium 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 Purpose Premium Yield, you can compare the effects of market volatilities on BMO High and Purpose Premium 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 Purpose Premium. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO High and Purpose Premium.
Diversification Opportunities for BMO High and Purpose Premium
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between BMO and Purpose is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding BMO High Yield and Purpose Premium Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Purpose Premium Yield 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 Purpose Premium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Purpose Premium Yield has no effect on the direction of BMO High i.e., BMO High and Purpose Premium go up and down completely randomly.
Pair Corralation between BMO High and Purpose Premium
Assuming the 90 days trading horizon BMO High Yield is expected to generate 0.55 times more return on investment than Purpose Premium. However, BMO High Yield is 1.83 times less risky than Purpose Premium. It trades about 0.39 of its potential returns per unit of risk. Purpose Premium Yield is currently generating about -0.02 per unit of risk. If you would invest 1,881 in BMO High Yield on September 13, 2024 and sell it today you would earn a total of 52.00 from holding BMO High Yield or generate 2.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO High Yield vs. Purpose Premium Yield
Performance |
| Timeline |
| BMO High Yield |
| Purpose Premium Yield |
BMO High and Purpose Premium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO High and Purpose Premium
The main advantage of trading using opposite BMO High and Purpose Premium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO High position performs unexpectedly, Purpose Premium 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 Purpose Premium will offset losses from the drop in Purpose Premium's long position.| BMO High vs. BMO High Yield | BMO High vs. BMO Preferred Share | BMO High vs. BMO Preferred Share | BMO High vs. BMO Europe High |
| Purpose Premium vs. Purpose Enhanced Dividend | Purpose Premium vs. Purpose Monthly Income | Purpose Premium vs. BMO Put Write | Purpose Premium vs. Purpose Strategic Yield |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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