Correlation Between BMO Covered and BMO Europe
Can any of the company-specific risk be diversified away by investing in both BMO Covered and BMO Europe 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 BMO Europe 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 BMO Europe High, you can compare the effects of market volatilities on BMO Covered and BMO Europe 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 BMO Europe. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Covered and BMO Europe.
Diversification Opportunities for BMO Covered and BMO Europe
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between BMO and BMO is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding BMO Covered Call and BMO Europe High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Europe High 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 BMO Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Europe High has no effect on the direction of BMO Covered i.e., BMO Covered and BMO Europe go up and down completely randomly.
Pair Corralation between BMO Covered and BMO Europe
Assuming the 90 days trading horizon BMO Covered Call is expected to generate 0.85 times more return on investment than BMO Europe. However, BMO Covered Call is 1.18 times less risky than BMO Europe. It trades about 0.1 of its potential returns per unit of risk. BMO Europe High is currently generating about 0.05 per unit of risk. If you would invest 1,613 in BMO Covered Call on August 29, 2024 and sell it today you would earn a total of 397.00 from holding BMO Covered Call or generate 24.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Covered Call vs. BMO Europe High
Performance |
| Timeline |
| BMO Covered Call |
| BMO Europe High |
BMO Covered and BMO Europe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Covered and BMO Europe
The main advantage of trading using opposite BMO Covered and BMO Europe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Covered position performs unexpectedly, BMO Europe 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 Europe will offset losses from the drop in BMO Europe'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 |
| BMO Europe vs. BMO Europe High | BMO Europe vs. BMO High Dividend | BMO Europe vs. BMO Covered Call | BMO Europe vs. BMO Global 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
Other Complementary Tools
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas |