Correlation Between BMO Sustainable and BMO Global
Can any of the company-specific risk be diversified away by investing in both BMO Sustainable and BMO Global 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 Sustainable and BMO Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Sustainable Global and BMO Global Strategic, you can compare the effects of market volatilities on BMO Sustainable and BMO Global 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 Sustainable with a short position of BMO Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Sustainable and BMO Global.
Diversification Opportunities for BMO Sustainable and BMO Global
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between BMO and BMO is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding BMO Sustainable Global and BMO Global Strategic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Global Strategic and BMO Sustainable 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 Sustainable Global are associated (or correlated) with BMO Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Global Strategic has no effect on the direction of BMO Sustainable i.e., BMO Sustainable and BMO Global go up and down completely randomly.
Pair Corralation between BMO Sustainable and BMO Global
Assuming the 90 days trading horizon BMO Sustainable is expected to generate 1.56 times less return on investment than BMO Global. But when comparing it to its historical volatility, BMO Sustainable Global is 1.02 times less risky than BMO Global. It trades about 0.13 of its potential returns per unit of risk. BMO Global Strategic is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 2,731 in BMO Global Strategic on September 1, 2024 and sell it today you would earn a total of 37.00 from holding BMO Global Strategic or generate 1.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Sustainable Global vs. BMO Global Strategic
Performance |
| Timeline |
| BMO Sustainable Global |
| BMO Global Strategic |
BMO Sustainable and BMO Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Sustainable and BMO Global
The main advantage of trading using opposite BMO Sustainable and BMO Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Sustainable position performs unexpectedly, BMO Global 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 Global will offset losses from the drop in BMO Global's long position.| BMO Sustainable vs. Evolve Active Canadian | BMO Sustainable vs. Evolve Banks Enhanced | BMO Sustainable vs. Evolve Global Materials | BMO Sustainable vs. Evolve Global Healthcare |
| BMO Global vs. BMO Sustainable Global | BMO Global vs. BMO Corporate Bond | BMO Global vs. BMO Core Plus | BMO Global vs. BMO Long Provincial |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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