Correlation Between BMO Short and BMO Global
Can any of the company-specific risk be diversified away by investing in both BMO Short and BMO Global 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 Short and BMO Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Short Term Bond and BMO Global High, you can compare the effects of market volatilities on BMO Short and BMO Global 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 Short with a short position of BMO Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Short and BMO Global.
Diversification Opportunities for BMO Short and BMO Global
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between BMO and BMO is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding BMO Short Term Bond and BMO Global High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Global High and BMO Short 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 Short Term Bond are associated (or correlated) with BMO Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Global High has no effect on the direction of BMO Short i.e., BMO Short and BMO Global go up and down completely randomly.
Pair Corralation between BMO Short and BMO Global
Assuming the 90 days trading horizon BMO Short Term Bond is expected to under-perform the BMO Global. But the etf apears to be less risky and, when comparing its historical volatility, BMO Short Term Bond is 4.17 times less risky than BMO Global. The etf trades about -0.06 of its potential returns per unit of risk. The BMO Global High is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 3,201 in BMO Global High on August 29, 2024 and sell it today you would earn a total of 73.00 from holding BMO Global High or generate 2.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
BMO Short Term Bond vs. BMO Global High
Performance |
| Timeline |
| BMO Short Term |
| BMO Global High |
BMO Short and BMO Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Short and BMO Global
The main advantage of trading using opposite BMO Short and BMO Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Short position performs unexpectedly, BMO Global 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 Global will offset losses from the drop in BMO Global's long position.| BMO Short vs. BMO Corporate Bond | BMO Short vs. BMO Government Bond | BMO Short vs. BMO Ultra Short Term | BMO Short vs. BMO Short Term IG |
| BMO Global vs. iShares SPTSX 60 | BMO Global vs. iShares Core SP | BMO Global vs. iShares Core SPTSX | BMO Global vs. BMO Aggregate 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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