Correlation Between BMO High and Fidelity High
Can any of the company-specific risk be diversified away by investing in both BMO High 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 High 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 High Dividend and Fidelity High Dividend, you can compare the effects of market volatilities on BMO High 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 High with a short position of Fidelity High. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO High and Fidelity High.
Diversification Opportunities for BMO High and Fidelity High
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BMO and Fidelity is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding BMO High Dividend 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 High 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 High Dividend 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 High i.e., BMO High and Fidelity High go up and down completely randomly.
Pair Corralation between BMO High and Fidelity High
Assuming the 90 days trading horizon BMO High is expected to generate 1.18 times less return on investment than Fidelity High. But when comparing it to its historical volatility, BMO High Dividend is 1.35 times less risky than Fidelity High. It trades about 0.08 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 | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO High Dividend vs. Fidelity High Dividend
Performance |
| Timeline |
| BMO High Dividend |
| Fidelity High Dividend |
BMO High and Fidelity High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO High and Fidelity High
The main advantage of trading using opposite BMO High and Fidelity High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO High 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.| BMO High vs. BMO Europe High | BMO High vs. BMO Covered Call | BMO High vs. BMO Covered Call | BMO High vs. BMO Europe High |
| 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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