Correlation Between BMO Preferred and BMO Put
Can any of the company-specific risk be diversified away by investing in both BMO Preferred and BMO Put 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 Preferred and BMO Put into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Preferred Share and BMO Put Write, you can compare the effects of market volatilities on BMO Preferred and BMO Put 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 Preferred with a short position of BMO Put. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Preferred and BMO Put.
Diversification Opportunities for BMO Preferred and BMO Put
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between BMO and BMO is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding BMO Preferred Share and BMO Put Write in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Put Write and BMO Preferred 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 Preferred Share are associated (or correlated) with BMO Put. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Put Write has no effect on the direction of BMO Preferred i.e., BMO Preferred and BMO Put go up and down completely randomly.
Pair Corralation between BMO Preferred and BMO Put
Assuming the 90 days trading horizon BMO Preferred is expected to generate 27.52 times less return on investment than BMO Put. But when comparing it to its historical volatility, BMO Preferred Share is 1.21 times less risky than BMO Put. It trades about 0.01 of its potential returns per unit of risk. BMO Put Write is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 1,576 in BMO Put Write on September 1, 2024 and sell it today you would earn a total of 52.00 from holding BMO Put Write or generate 3.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Preferred Share vs. BMO Put Write
Performance |
| Timeline |
| BMO Preferred Share |
| BMO Put Write |
BMO Preferred and BMO Put Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Preferred and BMO Put
The main advantage of trading using opposite BMO Preferred and BMO Put positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Preferred position performs unexpectedly, BMO Put 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 Put will offset losses from the drop in BMO Put's long position.| BMO Preferred vs. BMO Preferred Share | BMO Preferred vs. BMO High Yield | BMO Preferred vs. BMO Put Write | BMO Preferred vs. BMO Laddered Preferred |
| BMO Put vs. BMO Put Write | BMO Put vs. BMO Europe High | BMO Put vs. BMO High Dividend | BMO Put vs. BMO Europe High |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
Other Complementary Tools
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated |