Correlation Between BMO Low and BMO Dividend

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Can any of the company-specific risk be diversified away by investing in both BMO Low and BMO Dividend 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 Low and BMO Dividend into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Low Volatility and BMO Dividend ETF, you can compare the effects of market volatilities on BMO Low and BMO Dividend 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 Low with a short position of BMO Dividend. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Low and BMO Dividend.

Diversification Opportunities for BMO Low and BMO Dividend

0.69
  Correlation Coefficient

Poor diversification

The 3 months correlation between BMO and BMO is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding BMO Low Volatility and BMO Dividend ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Dividend ETF and BMO Low 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 Low Volatility are associated (or correlated) with BMO Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Dividend ETF has no effect on the direction of BMO Low i.e., BMO Low and BMO Dividend go up and down completely randomly.

Pair Corralation between BMO Low and BMO Dividend

Assuming the 90 days trading horizon BMO Low Volatility is expected to under-perform the BMO Dividend. But the etf apears to be less risky and, when comparing its historical volatility, BMO Low Volatility is 2.17 times less risky than BMO Dividend. The etf trades about 0.0 of its potential returns per unit of risk. The BMO Dividend ETF is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  4,550  in BMO Dividend ETF on August 28, 2024 and sell it today you would earn a total of  155.00  from holding BMO Dividend ETF or generate 3.41% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

BMO Low Volatility  vs.  BMO Dividend ETF

 Performance 
       Timeline  
BMO Low Volatility 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in BMO Low Volatility are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental drivers, BMO Low is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.
BMO Dividend ETF 

Risk-Adjusted Performance

19 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in BMO Dividend ETF are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, BMO Dividend may actually be approaching a critical reversion point that can send shares even higher in December 2024.

BMO Low and BMO Dividend Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with BMO Low and BMO Dividend

The main advantage of trading using opposite BMO Low and BMO Dividend positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Low position performs unexpectedly, BMO Dividend 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 Dividend will offset losses from the drop in BMO Dividend's long position.
The idea behind BMO Low Volatility and BMO Dividend ETF pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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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