Correlation Between BMO NASDAQ and BetaPro Crude
Can any of the company-specific risk be diversified away by investing in both BMO NASDAQ and BetaPro Crude 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 NASDAQ and BetaPro Crude into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO NASDAQ 100 and BetaPro Crude Oil, you can compare the effects of market volatilities on BMO NASDAQ and BetaPro Crude 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 NASDAQ with a short position of BetaPro Crude. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO NASDAQ and BetaPro Crude.
Diversification Opportunities for BMO NASDAQ and BetaPro Crude
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between BMO and BetaPro is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding BMO NASDAQ 100 and BetaPro Crude Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BetaPro Crude Oil and BMO NASDAQ 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 NASDAQ 100 are associated (or correlated) with BetaPro Crude. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BetaPro Crude Oil has no effect on the direction of BMO NASDAQ i.e., BMO NASDAQ and BetaPro Crude go up and down completely randomly.
Pair Corralation between BMO NASDAQ and BetaPro Crude
Assuming the 90 days trading horizon BMO NASDAQ 100 is expected to generate 0.29 times more return on investment than BetaPro Crude. However, BMO NASDAQ 100 is 3.45 times less risky than BetaPro Crude. It trades about 0.13 of its potential returns per unit of risk. BetaPro Crude Oil is currently generating about -0.02 per unit of risk. If you would invest 5,133 in BMO NASDAQ 100 on October 21, 2024 and sell it today you would earn a total of 4,883 from holding BMO NASDAQ 100 or generate 95.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO NASDAQ 100 vs. BetaPro Crude Oil
Performance |
| Timeline |
| BMO NASDAQ 100 |
| BetaPro Crude Oil |
BMO NASDAQ and BetaPro Crude Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO NASDAQ and BetaPro Crude
The main advantage of trading using opposite BMO NASDAQ and BetaPro Crude positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO NASDAQ position performs unexpectedly, BetaPro Crude 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 BetaPro Crude will offset losses from the drop in BetaPro Crude's long position.The idea behind BMO NASDAQ 100 and BetaPro Crude Oil pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| BetaPro Crude vs. BetaPro Crude Oil | BetaPro Crude vs. BetaPro Natural Gas | BetaPro Crude vs. BetaPro Natural Gas | BetaPro Crude vs. BetaPro Canadian Gold |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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