Correlation Between BMO Europe and Fidelity High
Can any of the company-specific risk be diversified away by investing in both BMO Europe and Fidelity High 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 Europe and Fidelity High into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Europe High and Fidelity High Dividend, you can compare the effects of market volatilities on BMO Europe and Fidelity High 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 Europe with a short position of Fidelity High. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Europe and Fidelity High.
Diversification Opportunities for BMO Europe and Fidelity High
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between BMO and Fidelity is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding BMO Europe High and Fidelity High Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity High Dividend and BMO Europe 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 Europe High are associated (or correlated) with Fidelity High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity High Dividend has no effect on the direction of BMO Europe i.e., BMO Europe and Fidelity High go up and down completely randomly.
Pair Corralation between BMO Europe and Fidelity High
Assuming the 90 days trading horizon BMO Europe is expected to generate 1.29 times less return on investment than Fidelity High. But when comparing it to its historical volatility, BMO Europe High is 1.15 times less risky than Fidelity High. It trades about 0.06 of its potential returns per unit of risk. Fidelity High Dividend is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,610 in Fidelity High Dividend on August 26, 2024 and sell it today you would earn a total of 720.00 from holding Fidelity High Dividend or generate 27.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Europe High vs. Fidelity High Dividend
Performance |
| Timeline |
| BMO Europe High |
| Fidelity High Dividend |
BMO Europe and Fidelity High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Europe and Fidelity High
The main advantage of trading using opposite BMO Europe and Fidelity High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Europe position performs unexpectedly, Fidelity High 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 Fidelity High will offset losses from the drop in Fidelity High's long position.The idea behind BMO Europe High and Fidelity High Dividend pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Fidelity High vs. BMO Europe High | Fidelity High vs. BMO Covered Call | Fidelity High vs. BMO Covered Call | Fidelity High vs. BMO Europe 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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