Correlation Between BMO Equal and BMO NASDAQ
Can any of the company-specific risk be diversified away by investing in both BMO Equal and BMO NASDAQ 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 NASDAQ 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 NASDAQ 100, you can compare the effects of market volatilities on BMO Equal and BMO NASDAQ 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 NASDAQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Equal and BMO NASDAQ.
Diversification Opportunities for BMO Equal and BMO NASDAQ
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between BMO and BMO is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding BMO Equal Weight and BMO NASDAQ 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO NASDAQ 100 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 NASDAQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO NASDAQ 100 has no effect on the direction of BMO Equal i.e., BMO Equal and BMO NASDAQ go up and down completely randomly.
Pair Corralation between BMO Equal and BMO NASDAQ
Assuming the 90 days trading horizon BMO Equal is expected to generate 14.45 times less return on investment than BMO NASDAQ. But when comparing it to its historical volatility, BMO Equal Weight is 1.07 times less risky than BMO NASDAQ. It trades about 0.01 of its potential returns per unit of risk. BMO NASDAQ 100 is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 9,414 in BMO NASDAQ 100 on August 29, 2024 and sell it today you would earn a total of 5,217 from holding BMO NASDAQ 100 or generate 55.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Equal Weight vs. BMO NASDAQ 100
Performance |
| Timeline |
| BMO Equal Weight |
| BMO NASDAQ 100 |
BMO Equal and BMO NASDAQ Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Equal and BMO NASDAQ
The main advantage of trading using opposite BMO Equal and BMO NASDAQ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Equal position performs unexpectedly, BMO NASDAQ 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 NASDAQ will offset losses from the drop in BMO NASDAQ'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 NASDAQ vs. BMO SP 500 | BMO NASDAQ vs. iShares NASDAQ 100 | BMO NASDAQ vs. BMO SPTSX Equal | BMO NASDAQ vs. iShares SPTSX Capped |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
Other Complementary Tools
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Transaction History View history of all your transactions and understand their impact on performance | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes |