Correlation Between BMO Mid and CIBC Conservative
Can any of the company-specific risk be diversified away by investing in both BMO Mid and CIBC Conservative 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 Mid and CIBC Conservative into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Mid Provincial and CIBC Conservative Fixed, you can compare the effects of market volatilities on BMO Mid and CIBC Conservative 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 Mid with a short position of CIBC Conservative. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Mid and CIBC Conservative.
Diversification Opportunities for BMO Mid and CIBC Conservative
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between BMO and CIBC is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding BMO Mid Provincial and CIBC Conservative Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CIBC Conservative Fixed and BMO Mid 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 Mid Provincial are associated (or correlated) with CIBC Conservative. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CIBC Conservative Fixed has no effect on the direction of BMO Mid i.e., BMO Mid and CIBC Conservative go up and down completely randomly.
Pair Corralation between BMO Mid and CIBC Conservative
Assuming the 90 days trading horizon BMO Mid Provincial is expected to generate 1.95 times more return on investment than CIBC Conservative. However, BMO Mid is 1.95 times more volatile than CIBC Conservative Fixed. It trades about 0.17 of its potential returns per unit of risk. CIBC Conservative Fixed is currently generating about 0.13 per unit of risk. If you would invest 1,393 in BMO Mid Provincial on November 3, 2024 and sell it today you would earn a total of 19.00 from holding BMO Mid Provincial or generate 1.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Mid Provincial vs. CIBC Conservative Fixed
Performance |
| Timeline |
| BMO Mid Provincial |
| CIBC Conservative Fixed |
BMO Mid and CIBC Conservative Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Mid and CIBC Conservative
The main advantage of trading using opposite BMO Mid and CIBC Conservative positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Mid position performs unexpectedly, CIBC Conservative 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 CIBC Conservative will offset losses from the drop in CIBC Conservative's long position.| BMO Mid vs. BMO Long Federal | BMO Mid vs. BMO Long Provincial | BMO Mid vs. Wealthsimple Developed Markets | BMO Mid vs. Wealthsimple North America |
| CIBC Conservative vs. CIBC Core Fixed | CIBC Conservative vs. CIBC Canadian Equity | CIBC Conservative vs. CIBC Clean Energy | CIBC Conservative vs. CIBC Qx Low |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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