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 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 generate 1.18 times more return on investment than BMO Dividend. However, BMO Low is 1.18 times more volatile than BMO Dividend ETF. It trades about 0.16 of its potential returns per unit of risk. BMO Dividend ETF is currently generating about 0.18 per unit of risk. If you would invest 5,429 in BMO Low Volatility on November 9, 2024 and sell it today you would earn a total of 179.00 from holding BMO Low Volatility or generate 3.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Low Volatility vs. BMO Dividend ETF
Performance |
| Timeline |
| BMO Low Volatility |
| BMO Dividend ETF |
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. BMO Low Volatility | BMO Low vs. BMO MSCI USA | BMO Low vs. BMO Equal Weight | BMO Low vs. BMO Dividend ETF |
| BMO Dividend vs. BMO International Dividend | BMO Dividend vs. BMO Canadian Dividend | BMO Dividend vs. BMO Low Volatility | BMO Dividend vs. BMO High Dividend |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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