Correlation Between BMO Low and BMO Dividend
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 CAD, 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
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between BMO and BMO is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding BMO Low Volatility and BMO Dividend CAD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Dividend CAD 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 CAD 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 is expected to generate 1.72 times less return on investment than BMO Dividend. But when comparing it to its historical volatility, BMO Low Volatility is 1.06 times less risky than BMO Dividend. It trades about 0.04 of its potential returns per unit of risk. BMO Dividend CAD is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,563 in BMO Dividend CAD on September 4, 2024 and sell it today you would earn a total of 618.00 from holding BMO Dividend CAD or generate 24.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Low Volatility vs. BMO Dividend CAD
Performance |
| Timeline |
| BMO Low Volatility |
| BMO Dividend CAD |
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.| BMO Low vs. Franklin Bissett Corporate | BMO Low vs. FT AlphaDEX Industrials | BMO Low vs. Dynamic Active Dividend | BMO Low vs. BMO Aggregate Bond |
| BMO Dividend vs. BMO Short Term Bond | BMO Dividend vs. BMO Canadian Bank | BMO Dividend vs. BMO Aggregate Bond | BMO Dividend vs. BMO Balanced ETF |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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