Correlation Between BMO Long and BMO Emerging
Can any of the company-specific risk be diversified away by investing in both BMO Long and BMO Emerging 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 BMO Emerging 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 BMO Emerging Markets, you can compare the effects of market volatilities on BMO Long and BMO Emerging 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 BMO Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Long and BMO Emerging.
Diversification Opportunities for BMO Long and BMO Emerging
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between BMO and BMO is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding BMO Long Corporate and BMO Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Emerging Markets 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 BMO Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Emerging Markets has no effect on the direction of BMO Long i.e., BMO Long and BMO Emerging go up and down completely randomly.
Pair Corralation between BMO Long and BMO Emerging
Assuming the 90 days trading horizon BMO Long Corporate is expected to generate 1.53 times more return on investment than BMO Emerging. However, BMO Long is 1.53 times more volatile than BMO Emerging Markets. It trades about 0.17 of its potential returns per unit of risk. BMO Emerging Markets is currently generating about -0.07 per unit of risk. If you would invest 1,516 in BMO Long Corporate on August 29, 2024 and sell it today you would earn a total of 35.00 from holding BMO Long Corporate or generate 2.31% 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. BMO Emerging Markets
Performance |
| Timeline |
| BMO Long Corporate |
| BMO Emerging Markets |
BMO Long and BMO Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Long and BMO Emerging
The main advantage of trading using opposite BMO Long and BMO Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Long position performs unexpectedly, BMO Emerging 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 Emerging will offset losses from the drop in BMO Emerging'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 |
| BMO Emerging vs. iShares IG Corporate | BMO Emerging vs. iShares 1 10Yr Laddered | BMO Emerging vs. iShares Floating Rate | BMO Emerging vs. iShares Convertible Bond |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
Other Complementary Tools
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk |