Correlation Between BMO Put and BMO High
Can any of the company-specific risk be diversified away by investing in both BMO Put and BMO High 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 Put and BMO High into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Put Write and BMO High Dividend, you can compare the effects of market volatilities on BMO Put and BMO High 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 Put with a short position of BMO High. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Put and BMO High.
Diversification Opportunities for BMO Put and BMO High
Modest diversification
The 3 months correlation between BMO and BMO is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding BMO Put Write and BMO High Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO High Dividend and BMO Put 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 Put Write are associated (or correlated) with BMO High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO High Dividend has no effect on the direction of BMO Put i.e., BMO Put and BMO High go up and down completely randomly.
Pair Corralation between BMO Put and BMO High
Assuming the 90 days trading horizon BMO Put Write is expected to under-perform the BMO High. But the etf apears to be less risky and, when comparing its historical volatility, BMO Put Write is 1.68 times less risky than BMO High. The etf trades about -0.24 of its potential returns per unit of risk. The BMO High Dividend is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,075 in BMO High Dividend on November 28, 2024 and sell it today you would earn a total of 14.00 from holding BMO High Dividend or generate 0.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Put Write vs. BMO High Dividend
Performance |
| Timeline |
| BMO Put Write |
| BMO High Dividend |
BMO Put and BMO High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Put and BMO High
The main advantage of trading using opposite BMO Put and BMO High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Put position performs unexpectedly, BMO High 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 High will offset losses from the drop in BMO High's long position.| BMO Put vs. BMO Put Write | BMO Put vs. BMO Global High | BMO Put vs. Harvest Equal Weight | BMO Put vs. CI Gold Giants |
| BMO High vs. BMO Europe High | BMO High vs. BMO Global High | BMO High vs. BMO Covered Call | BMO High vs. BMO Put Write |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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