Correlation Between BMO Equal and BMO Monthly
Can any of the company-specific risk be diversified away by investing in both BMO Equal and BMO Monthly 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 BMO Monthly 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 BMO Monthly Income, you can compare the effects of market volatilities on BMO Equal and BMO Monthly 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 BMO Monthly. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Equal and BMO Monthly.
Diversification Opportunities for BMO Equal and BMO Monthly
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between BMO and BMO is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding BMO Equal Weight and BMO Monthly Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Monthly Income 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 BMO Monthly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Monthly Income has no effect on the direction of BMO Equal i.e., BMO Equal and BMO Monthly go up and down completely randomly.
Pair Corralation between BMO Equal and BMO Monthly
Assuming the 90 days trading horizon BMO Equal Weight is expected to generate 2.39 times more return on investment than BMO Monthly. However, BMO Equal is 2.39 times more volatile than BMO Monthly Income. It trades about 0.22 of its potential returns per unit of risk. BMO Monthly Income is currently generating about 0.06 per unit of risk. If you would invest 2,089 in BMO Equal Weight on November 27, 2024 and sell it today you would earn a total of 73.00 from holding BMO Equal Weight or generate 3.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Equal Weight vs. BMO Monthly Income
Performance |
| Timeline |
| BMO Equal Weight |
| BMO Monthly Income |
BMO Equal and BMO Monthly Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Equal and BMO Monthly
The main advantage of trading using opposite BMO Equal and BMO Monthly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Equal position performs unexpectedly, BMO Monthly 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 Monthly will offset losses from the drop in BMO Monthly's long position.| BMO Equal vs. iShares SPTSX Capped | BMO Equal vs. BMO Equal Weight | BMO Equal vs. BMO Covered Call | BMO Equal vs. BMO SPTSX Equal |
| BMO Monthly vs. BMO International Dividend | BMO Monthly vs. BMO Equal Weight | BMO Monthly vs. BMO Covered Call | BMO Monthly vs. BMO High Yield |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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