Correlation Between BMO Laddered and BMO Covered
Can any of the company-specific risk be diversified away by investing in both BMO Laddered and BMO Covered 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 Laddered and BMO Covered into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Laddered Preferred and BMO Covered Call, you can compare the effects of market volatilities on BMO Laddered and BMO Covered 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 Laddered with a short position of BMO Covered. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Laddered and BMO Covered.
Diversification Opportunities for BMO Laddered and BMO Covered
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between BMO and BMO is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding BMO Laddered Preferred and BMO Covered Call in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Covered Call and BMO Laddered 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 Laddered Preferred are associated (or correlated) with BMO Covered. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Covered Call has no effect on the direction of BMO Laddered i.e., BMO Laddered and BMO Covered go up and down completely randomly.
Pair Corralation between BMO Laddered and BMO Covered
Assuming the 90 days trading horizon BMO Laddered Preferred is expected to generate 0.79 times more return on investment than BMO Covered. However, BMO Laddered Preferred is 1.27 times less risky than BMO Covered. It trades about 0.08 of its potential returns per unit of risk. BMO Covered Call is currently generating about 0.03 per unit of risk. If you would invest 865.00 in BMO Laddered Preferred on September 3, 2024 and sell it today you would earn a total of 197.00 from holding BMO Laddered Preferred or generate 22.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Laddered Preferred vs. BMO Covered Call
Performance |
| Timeline |
| BMO Laddered Preferred |
| BMO Covered Call |
BMO Laddered and BMO Covered Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Laddered and BMO Covered
The main advantage of trading using opposite BMO Laddered and BMO Covered positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Laddered position performs unexpectedly, BMO Covered 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 Covered will offset losses from the drop in BMO Covered's long position.| BMO Laddered vs. iShares SPTSX Canadian | BMO Laddered vs. Global X Active | BMO Laddered vs. BMO Europe High | BMO Laddered vs. BMO Equal Weight |
| BMO Covered vs. International Zeolite Corp | BMO Covered vs. European Residential Real | BMO Covered vs. Financial 15 Split | BMO Covered vs. Rubicon Organics |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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