Correlation Between BMO Equal and Brompton North
Can any of the company-specific risk be diversified away by investing in both BMO Equal and Brompton North 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 Equal and Brompton North into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Equal Weight and Brompton North American, you can compare the effects of market volatilities on BMO Equal and Brompton North 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 Equal with a short position of Brompton North. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Equal and Brompton North.
Diversification Opportunities for BMO Equal and Brompton North
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between BMO and Brompton is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding BMO Equal Weight and Brompton North American in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brompton North American and BMO Equal 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 Equal Weight are associated (or correlated) with Brompton North. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brompton North American has no effect on the direction of BMO Equal i.e., BMO Equal and Brompton North go up and down completely randomly.
Pair Corralation between BMO Equal and Brompton North
Assuming the 90 days trading horizon BMO Equal Weight is expected to generate 1.45 times more return on investment than Brompton North. However, BMO Equal is 1.45 times more volatile than Brompton North American. It trades about 0.14 of its potential returns per unit of risk. Brompton North American is currently generating about 0.17 per unit of risk. If you would invest 2,387 in BMO Equal Weight on August 29, 2024 and sell it today you would earn a total of 1,183 from holding BMO Equal Weight or generate 49.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.52% |
| Values | Daily Returns |
BMO Equal Weight vs. Brompton North American
Performance |
| Timeline |
| BMO Equal Weight |
| Brompton North American |
BMO Equal and Brompton North Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Equal and Brompton North
The main advantage of trading using opposite BMO Equal and Brompton North positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Equal position performs unexpectedly, Brompton North 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 Brompton North will offset losses from the drop in Brompton North's long position.| BMO Equal vs. BMO Equal Weight | BMO Equal vs. BMO Equal Weight | BMO Equal vs. BMO SPTSX Equal | BMO Equal vs. BMO Equal Weight |
| Brompton North vs. Brompton Global Dividend | Brompton North vs. Tech Leaders Income | Brompton North vs. Global Healthcare Income | Brompton North vs. Brompton European Dividend |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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