Correlation Between BMO Equal and Desjardins
Can any of the company-specific risk be diversified away by investing in both BMO Equal and Desjardins 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 Desjardins 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 Desjardins RI USA, you can compare the effects of market volatilities on BMO Equal and Desjardins 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 Desjardins. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Equal and Desjardins.
Diversification Opportunities for BMO Equal and Desjardins
-0.77 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between BMO and Desjardins is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding BMO Equal Weight and Desjardins RI USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Desjardins RI USA 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 Desjardins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Desjardins RI USA has no effect on the direction of BMO Equal i.e., BMO Equal and Desjardins go up and down completely randomly.
Pair Corralation between BMO Equal and Desjardins
Assuming the 90 days trading horizon BMO Equal is expected to generate 12.29 times less return on investment than Desjardins. In addition to that, BMO Equal is 1.13 times more volatile than Desjardins RI USA. It trades about 0.01 of its total potential returns per unit of risk. Desjardins RI USA is currently generating about 0.15 per unit of volatility. If you would invest 3,083 in Desjardins RI USA on September 2, 2024 and sell it today you would earn a total of 1,442 from holding Desjardins RI USA or generate 46.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Equal Weight vs. Desjardins RI USA
Performance |
| Timeline |
| BMO Equal Weight |
| Desjardins RI USA |
BMO Equal and Desjardins Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Equal and Desjardins
The main advantage of trading using opposite BMO Equal and Desjardins positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Equal position performs unexpectedly, Desjardins 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 Desjardins will offset losses from the drop in Desjardins' long position.| BMO Equal vs. iShares Canadian HYBrid | BMO Equal vs. Brompton European Dividend | BMO Equal vs. Solar Alliance Energy | BMO Equal vs. PHN Multi Style All Cap |
| Desjardins vs. BMO SP 500 | Desjardins vs. Vanguard SP 500 | Desjardins vs. iShares Core SP | Desjardins vs. BMO SP 500 |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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