Correlation Between BMO Europe and BMO Premium
Can any of the company-specific risk be diversified away by investing in both BMO Europe and BMO Premium 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 BMO Premium 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 BMO Premium Yield, you can compare the effects of market volatilities on BMO Europe and BMO Premium 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 BMO Premium. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Europe and BMO Premium.
Diversification Opportunities for BMO Europe and BMO Premium
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between BMO and BMO is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding BMO Europe High and BMO Premium Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Premium Yield 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 BMO Premium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Premium Yield has no effect on the direction of BMO Europe i.e., BMO Europe and BMO Premium go up and down completely randomly.
Pair Corralation between BMO Europe and BMO Premium
Assuming the 90 days trading horizon BMO Europe High is expected to under-perform the BMO Premium. In addition to that, BMO Europe is 1.2 times more volatile than BMO Premium Yield. It trades about -0.23 of its total potential returns per unit of risk. BMO Premium Yield is currently generating about 0.16 per unit of volatility. If you would invest 3,241 in BMO Premium Yield on August 29, 2024 and sell it today you would earn a total of 59.00 from holding BMO Premium Yield or generate 1.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Europe High vs. BMO Premium Yield
Performance |
| Timeline |
| BMO Europe High |
| BMO Premium Yield |
BMO Europe and BMO Premium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Europe and BMO Premium
The main advantage of trading using opposite BMO Europe and BMO Premium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Europe position performs unexpectedly, BMO Premium 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 Premium will offset losses from the drop in BMO Premium's long position.The idea behind BMO Europe High and BMO Premium Yield 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.| BMO Premium vs. Global Atomic Corp | BMO Premium vs. enCore Energy Corp | BMO Premium vs. Fission Uranium Corp | BMO Premium vs. NexGen 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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