Correlation Between BMO Canadian and BMO NASDAQ
Can any of the company-specific risk be diversified away by investing in both BMO Canadian 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 Canadian 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 Canadian High and BMO NASDAQ 100, you can compare the effects of market volatilities on BMO Canadian 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 Canadian with a short position of BMO NASDAQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Canadian and BMO NASDAQ.
Diversification Opportunities for BMO Canadian and BMO NASDAQ
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between BMO and BMO is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding BMO Canadian High 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 Canadian 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 Canadian High 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 Canadian i.e., BMO Canadian and BMO NASDAQ go up and down completely randomly.
Pair Corralation between BMO Canadian and BMO NASDAQ
Assuming the 90 days trading horizon BMO Canadian is expected to generate 1.55 times less return on investment than BMO NASDAQ. But when comparing it to its historical volatility, BMO Canadian High is 2.41 times less risky than BMO NASDAQ. It trades about 0.14 of its potential returns per unit of risk. BMO NASDAQ 100 is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 14,248 in BMO NASDAQ 100 on August 28, 2024 and sell it today you would earn a total of 301.00 from holding BMO NASDAQ 100 or generate 2.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Canadian High vs. BMO NASDAQ 100
Performance |
| Timeline |
| BMO Canadian High |
| BMO NASDAQ 100 |
BMO Canadian and BMO NASDAQ Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Canadian and BMO NASDAQ
The main advantage of trading using opposite BMO Canadian and BMO NASDAQ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Canadian 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 Canadian vs. iShares Diversified Monthly | BMO Canadian vs. iShares SPTSX Capped | BMO Canadian vs. iShares SPTSX Capped |
| 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
Other Complementary Tools
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments |