Correlation Between BMO Global and BMO High
Can any of the company-specific risk be diversified away by investing in both BMO Global and BMO 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 Global and BMO High into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Global High and BMO High Dividend, you can compare the effects of market volatilities on BMO Global and BMO 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 Global with a short position of BMO High. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Global and BMO High.
Diversification Opportunities for BMO Global and BMO High
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between BMO and BMO is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding BMO Global High and BMO High Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO High Dividend and BMO Global 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 Global High are associated (or correlated) with BMO High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO High Dividend has no effect on the direction of BMO Global i.e., BMO Global and BMO High go up and down completely randomly.
Pair Corralation between BMO Global and BMO High
Assuming the 90 days trading horizon BMO Global High is expected to generate 0.95 times more return on investment than BMO High. However, BMO Global High is 1.05 times less risky than BMO High. It trades about 0.1 of its potential returns per unit of risk. BMO High Dividend is currently generating about 0.09 per unit of risk. If you would invest 2,519 in BMO Global High on August 29, 2024 and sell it today you would earn a total of 755.00 from holding BMO Global High or generate 29.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Global High vs. BMO High Dividend
Performance |
| Timeline |
| BMO Global High |
| BMO High Dividend |
BMO Global and BMO High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Global and BMO High
The main advantage of trading using opposite BMO Global and BMO High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Global position performs unexpectedly, BMO 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 BMO High will offset losses from the drop in BMO High's long position.| BMO Global vs. iShares SPTSX 60 | BMO Global vs. iShares Core SP | BMO Global vs. iShares Core SPTSX | BMO Global vs. BMO Aggregate Bond |
| BMO High vs. BMO Europe High | BMO High vs. BMO Covered Call | BMO High vs. BMO Europe High | BMO High vs. Forstrong Global Income |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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