Correlation Between BMO Long and Amazon CDR
Can any of the company-specific risk be diversified away by investing in both BMO Long and Amazon CDR 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 Long and Amazon CDR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Long Corporate and Amazon CDR, you can compare the effects of market volatilities on BMO Long and Amazon CDR 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 Long with a short position of Amazon CDR. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Long and Amazon CDR.
Diversification Opportunities for BMO Long and Amazon CDR
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BMO and Amazon is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding BMO Long Corporate and Amazon CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon CDR and BMO Long 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 Long Corporate are associated (or correlated) with Amazon CDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon CDR has no effect on the direction of BMO Long i.e., BMO Long and Amazon CDR go up and down completely randomly.
Pair Corralation between BMO Long and Amazon CDR
Assuming the 90 days trading horizon BMO Long is expected to generate 2.9 times less return on investment than Amazon CDR. But when comparing it to its historical volatility, BMO Long Corporate is 2.63 times less risky than Amazon CDR. It trades about 0.2 of its potential returns per unit of risk. Amazon CDR is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 2,330 in Amazon CDR on September 5, 2024 and sell it today you would earn a total of 212.00 from holding Amazon CDR or generate 9.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Long Corporate vs. Amazon CDR
Performance |
| Timeline |
| BMO Long Corporate |
| Amazon CDR |
BMO Long and Amazon CDR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Long and Amazon CDR
The main advantage of trading using opposite BMO Long and Amazon CDR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Long position performs unexpectedly, Amazon CDR 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 Amazon CDR will offset losses from the drop in Amazon CDR's long position.| BMO Long vs. BMO Mid Corporate | BMO Long vs. BMO Short Corporate | BMO Long vs. BMO High Yield | BMO Long vs. BMO Long Provincial |
| Amazon CDR vs. Northstar Clean Technologies | Amazon CDR vs. Chemtrade Logistics Income | Amazon CDR vs. SalesforceCom CDR | Amazon CDR vs. Ocumetics Technology Corp |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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