Correlation Between BMO Equal and Hamilton Australian
Can any of the company-specific risk be diversified away by investing in both BMO Equal and Hamilton Australian 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 Hamilton Australian 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 Hamilton Australian Bank, you can compare the effects of market volatilities on BMO Equal and Hamilton Australian 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 Hamilton Australian. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Equal and Hamilton Australian.
Diversification Opportunities for BMO Equal and Hamilton Australian
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BMO and Hamilton is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding BMO Equal Weight and Hamilton Australian Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hamilton Australian Bank 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 Hamilton Australian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hamilton Australian Bank has no effect on the direction of BMO Equal i.e., BMO Equal and Hamilton Australian go up and down completely randomly.
Pair Corralation between BMO Equal and Hamilton Australian
Assuming the 90 days trading horizon BMO Equal Weight is expected to generate 1.55 times more return on investment than Hamilton Australian. However, BMO Equal is 1.55 times more volatile than Hamilton Australian Bank. It trades about 0.13 of its potential returns per unit of risk. Hamilton Australian Bank is currently generating about 0.17 per unit of risk. If you would invest 2,232 in BMO Equal Weight on September 2, 2024 and sell it today you would earn a total of 1,325 from holding BMO Equal Weight or generate 59.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Equal Weight vs. Hamilton Australian Bank
Performance |
| Timeline |
| BMO Equal Weight |
| Hamilton Australian Bank |
BMO Equal and Hamilton Australian Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Equal and Hamilton Australian
The main advantage of trading using opposite BMO Equal and Hamilton Australian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Equal position performs unexpectedly, Hamilton Australian 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 Hamilton Australian will offset losses from the drop in Hamilton Australian's long position.| BMO Equal vs. BMO Canadian Dividend | BMO Equal vs. BMO Covered Call | BMO Equal vs. BMO Canadian High | BMO Equal vs. BMO NASDAQ 100 |
| Hamilton Australian vs. BMO Canadian Dividend | Hamilton Australian vs. BMO Covered Call | Hamilton Australian vs. BMO Canadian High | Hamilton Australian vs. BMO NASDAQ 100 |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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