Correlation Between BMO Equal and Hamilton Canadian
Can any of the company-specific risk be diversified away by investing in both BMO Equal and Hamilton Canadian 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 Canadian 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 Canadian Financials, you can compare the effects of market volatilities on BMO Equal and Hamilton Canadian 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 Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Equal and Hamilton Canadian.
Diversification Opportunities for BMO Equal and Hamilton Canadian
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between BMO and Hamilton is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding BMO Equal Weight and Hamilton Canadian Financials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hamilton Canadian 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 Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hamilton Canadian has no effect on the direction of BMO Equal i.e., BMO Equal and Hamilton Canadian go up and down completely randomly.
Pair Corralation between BMO Equal and Hamilton Canadian
Assuming the 90 days trading horizon BMO Equal Weight is expected to generate 5.04 times more return on investment than Hamilton Canadian. However, BMO Equal is 5.04 times more volatile than Hamilton Canadian Financials. It trades about 0.22 of its potential returns per unit of risk. Hamilton Canadian Financials is currently generating about 0.32 per unit of risk. If you would invest 3,157 in BMO Equal Weight on August 29, 2024 and sell it today you would earn a total of 413.00 from holding BMO Equal Weight or generate 13.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Equal Weight vs. Hamilton Canadian Financials
Performance |
| Timeline |
| BMO Equal Weight |
| Hamilton Canadian |
BMO Equal and Hamilton Canadian Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Equal and Hamilton Canadian
The main advantage of trading using opposite BMO Equal and Hamilton Canadian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Equal position performs unexpectedly, Hamilton Canadian 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 Canadian will offset losses from the drop in Hamilton Canadian's long position.| BMO Equal vs. Brompton Global Dividend | BMO Equal vs. Tech Leaders Income | BMO Equal vs. Global Healthcare Income | BMO Equal vs. Brompton European Dividend |
| Hamilton Canadian vs. Brompton Global Dividend | Hamilton Canadian vs. Tech Leaders Income | Hamilton Canadian vs. Global Healthcare Income | Hamilton Canadian 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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