Correlation Between BMO Premium and CI Europe
Can any of the company-specific risk be diversified away by investing in both BMO Premium and CI Europe 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 Premium and CI Europe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Premium Yield and CI Europe Hedged, you can compare the effects of market volatilities on BMO Premium and CI Europe 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 Premium with a short position of CI Europe. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Premium and CI Europe.
Diversification Opportunities for BMO Premium and CI Europe
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between BMO and EHE is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding BMO Premium Yield and CI Europe Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CI Europe Hedged and BMO Premium 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 Premium Yield are associated (or correlated) with CI Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CI Europe Hedged has no effect on the direction of BMO Premium i.e., BMO Premium and CI Europe go up and down completely randomly.
Pair Corralation between BMO Premium and CI Europe
Assuming the 90 days trading horizon BMO Premium Yield is expected to generate 0.67 times more return on investment than CI Europe. However, BMO Premium Yield is 1.49 times less risky than CI Europe. It trades about 0.16 of its potential returns per unit of risk. CI Europe Hedged is currently generating about -0.11 per unit of risk. If you would invest 3,209 in BMO Premium Yield on September 1, 2024 and sell it today you would earn a total of 62.00 from holding BMO Premium Yield or generate 1.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
BMO Premium Yield vs. CI Europe Hedged
Performance |
| Timeline |
| BMO Premium Yield |
| CI Europe Hedged |
BMO Premium and CI Europe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Premium and CI Europe
The main advantage of trading using opposite BMO Premium and CI Europe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Premium position performs unexpectedly, CI Europe 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 CI Europe will offset losses from the drop in CI Europe's long position.| BMO Premium vs. Brompton Global Dividend | BMO Premium vs. Global Healthcare Income | BMO Premium vs. Tech Leaders Income | BMO Premium vs. Brompton North American |
| CI Europe vs. NBI High Yield | CI Europe vs. NBI Unconstrained Fixed | CI Europe vs. Mackenzie Developed ex North | CI Europe vs. BMO Short Term Bond |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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