Correlation Between BMO Covered and Harvest Equal
Can any of the company-specific risk be diversified away by investing in both BMO Covered and Harvest Equal 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 Covered and Harvest Equal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Covered Call and Harvest Equal Weight, you can compare the effects of market volatilities on BMO Covered and Harvest Equal 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 Covered with a short position of Harvest Equal. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Covered and Harvest Equal.
Diversification Opportunities for BMO Covered and Harvest Equal
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between BMO and Harvest is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding BMO Covered Call and Harvest Equal Weight in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harvest Equal Weight and BMO Covered 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 Covered Call are associated (or correlated) with Harvest Equal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harvest Equal Weight has no effect on the direction of BMO Covered i.e., BMO Covered and Harvest Equal go up and down completely randomly.
Pair Corralation between BMO Covered and Harvest Equal
Assuming the 90 days trading horizon BMO Covered Call is expected to generate 0.36 times more return on investment than Harvest Equal. However, BMO Covered Call is 2.74 times less risky than Harvest Equal. It trades about 0.81 of its potential returns per unit of risk. Harvest Equal Weight is currently generating about 0.29 per unit of risk. If you would invest 1,923 in BMO Covered Call on September 1, 2024 and sell it today you would earn a total of 91.00 from holding BMO Covered Call or generate 4.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Covered Call vs. Harvest Equal Weight
Performance |
| Timeline |
| BMO Covered Call |
| Harvest Equal Weight |
BMO Covered and Harvest Equal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Covered and Harvest Equal
The main advantage of trading using opposite BMO Covered and Harvest Equal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Covered position performs unexpectedly, Harvest Equal 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 Harvest Equal will offset losses from the drop in Harvest Equal's long position.| BMO Covered vs. BMO Covered Call | BMO Covered vs. BMO SPTSX Equal | BMO Covered vs. BMO Canadian High | BMO Covered vs. BMO High Dividend |
| Harvest Equal vs. Harvest Healthcare Leaders | Harvest Equal vs. CI Gold Giants | Harvest Equal vs. BMO Global High | Harvest Equal vs. First Asset Energy |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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