Correlation Between BMO Long and Financial
Can any of the company-specific risk be diversified away by investing in both BMO Long and Financial 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 Financial 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 Financial 15 Split, you can compare the effects of market volatilities on BMO Long and Financial 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 Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Long and Financial.
Diversification Opportunities for BMO Long and Financial
Weak diversification
The 3 months correlation between BMO and Financial is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding BMO Long Corporate and Financial 15 Split in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial 15 Split 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 Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial 15 Split has no effect on the direction of BMO Long i.e., BMO Long and Financial go up and down completely randomly.
Pair Corralation between BMO Long and Financial
Assuming the 90 days trading horizon BMO Long Corporate is expected to generate 1.84 times more return on investment than Financial. However, BMO Long is 1.84 times more volatile than Financial 15 Split. It trades about 0.2 of its potential returns per unit of risk. Financial 15 Split is currently generating about 0.3 per unit of risk. If you would invest 1,534 in BMO Long Corporate on September 5, 2024 and sell it today you would earn a total of 48.00 from holding BMO Long Corporate or generate 3.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Long Corporate vs. Financial 15 Split
Performance |
| Timeline |
| BMO Long Corporate |
| Financial 15 Split |
BMO Long and Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Long and Financial
The main advantage of trading using opposite BMO Long and Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Long position performs unexpectedly, Financial 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 Financial will offset losses from the drop in Financial'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 |
| Financial vs. GOLDMAN SACHS CDR | Financial vs. Galaxy Digital Holdings | Financial vs. Hut 8 Mining | Financial vs. Bitfarms |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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