Correlation Between BMO High and BMO International
Can any of the company-specific risk be diversified away by investing in both BMO High and BMO International 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 BMO International 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 BMO International Dividend, you can compare the effects of market volatilities on BMO High and BMO International 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 BMO International. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO High and BMO International.
Diversification Opportunities for BMO High and BMO International
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between BMO and BMO is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding BMO High Dividend and BMO International Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO International 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 BMO International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO International has no effect on the direction of BMO High i.e., BMO High and BMO International go up and down completely randomly.
Pair Corralation between BMO High and BMO International
Assuming the 90 days trading horizon BMO High is expected to generate 1.14 times less return on investment than BMO International. But when comparing it to its historical volatility, BMO High Dividend is 1.18 times less risky than BMO International. It trades about 0.09 of its potential returns per unit of risk. BMO International Dividend is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,922 in BMO International Dividend on November 19, 2024 and sell it today you would earn a total of 585.00 from holding BMO International Dividend or generate 30.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO High Dividend vs. BMO International Dividend
Performance |
| Timeline |
| BMO High Dividend |
| BMO International |
BMO High and BMO International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO High and BMO International
The main advantage of trading using opposite BMO High and BMO International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO High position performs unexpectedly, BMO International 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 International will offset losses from the drop in BMO International'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 |
| BMO International vs. BMO Dividend ETF | BMO International vs. BMO International Dividend | BMO International vs. BMO High Dividend | BMO International 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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