Correlation Between BMO Monthly and BMO International
Can any of the company-specific risk be diversified away by investing in both BMO Monthly and BMO International 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 Monthly and BMO International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Monthly Income and BMO International Dividend, you can compare the effects of market volatilities on BMO Monthly and BMO International 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 Monthly with a short position of BMO International. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Monthly and BMO International.
Diversification Opportunities for BMO Monthly and BMO International
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between BMO and BMO is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding BMO Monthly Income and BMO International Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO International and BMO Monthly 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 Monthly Income are associated (or correlated) with BMO International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO International has no effect on the direction of BMO Monthly i.e., BMO Monthly and BMO International go up and down completely randomly.
Pair Corralation between BMO Monthly and BMO International
Assuming the 90 days trading horizon BMO Monthly Income is expected to generate 0.44 times more return on investment than BMO International. However, BMO Monthly Income is 2.25 times less risky than BMO International. It trades about 0.2 of its potential returns per unit of risk. BMO International Dividend is currently generating about 0.0 per unit of risk. If you would invest 1,622 in BMO Monthly Income on September 3, 2024 and sell it today you would earn a total of 146.00 from holding BMO Monthly Income or generate 9.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Monthly Income vs. BMO International Dividend
Performance |
| Timeline |
| BMO Monthly Income |
| BMO International |
BMO Monthly and BMO International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Monthly and BMO International
The main advantage of trading using opposite BMO Monthly and BMO International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Monthly position performs unexpectedly, BMO International 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 International will offset losses from the drop in BMO International's long position.| BMO Monthly vs. BMO International Dividend | BMO Monthly vs. BMO Equal Weight | BMO Monthly vs. BMO Covered Call | BMO Monthly vs. BMO High Yield |
| BMO International vs. BMO Dividend ETF | BMO International vs. BMO International Dividend | BMO International vs. BMO High Dividend | BMO International vs. BMO Europe High |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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