Correlation Between BMO NASDAQ and CIBC Equity
Can any of the company-specific risk be diversified away by investing in both BMO NASDAQ and CIBC Equity 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 CIBC Equity 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 CIBC Equity Index, you can compare the effects of market volatilities on BMO NASDAQ and CIBC Equity 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 CIBC Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO NASDAQ and CIBC Equity.
Diversification Opportunities for BMO NASDAQ and CIBC Equity
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between BMO and CIBC is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding BMO NASDAQ 100 and CIBC Equity Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CIBC Equity Index 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 CIBC Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CIBC Equity Index has no effect on the direction of BMO NASDAQ i.e., BMO NASDAQ and CIBC Equity go up and down completely randomly.
Pair Corralation between BMO NASDAQ and CIBC Equity
Assuming the 90 days trading horizon BMO NASDAQ 100 is expected to generate 1.61 times more return on investment than CIBC Equity. However, BMO NASDAQ is 1.61 times more volatile than CIBC Equity Index. It trades about 0.17 of its potential returns per unit of risk. CIBC Equity Index is currently generating about 0.27 per unit of risk. If you would invest 14,735 in BMO NASDAQ 100 on September 13, 2024 and sell it today you would earn a total of 481.00 from holding BMO NASDAQ 100 or generate 3.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
BMO NASDAQ 100 vs. CIBC Equity Index
Performance |
| Timeline |
| BMO NASDAQ 100 |
| CIBC Equity Index |
BMO NASDAQ and CIBC Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO NASDAQ and CIBC Equity
The main advantage of trading using opposite BMO NASDAQ and CIBC Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO NASDAQ position performs unexpectedly, CIBC Equity 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 CIBC Equity will offset losses from the drop in CIBC Equity's long position.| BMO NASDAQ vs. iShares Core SP | BMO NASDAQ vs. iShares SPTSX Capped | BMO NASDAQ vs. Vanguard SP 500 | BMO NASDAQ vs. Vanguard SP 500 |
| CIBC Equity vs. CIBC Core Fixed | CIBC Equity vs. CIBC Canadian Equity | CIBC Equity vs. CIBC Clean Energy | CIBC Equity vs. CIBC Conservative Fixed |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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