Correlation Between BMO Europe and CI Europe
Can any of the company-specific risk be diversified away by investing in both BMO Europe and CI Europe 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 CI Europe 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 CI Europe Hedged, you can compare the effects of market volatilities on BMO Europe and CI Europe 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 CI Europe. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Europe and CI Europe.
Diversification Opportunities for BMO Europe and CI Europe
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BMO and EHE is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding BMO Europe High and CI Europe Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CI Europe Hedged 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 CI Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CI Europe Hedged has no effect on the direction of BMO Europe i.e., BMO Europe and CI Europe go up and down completely randomly.
Pair Corralation between BMO Europe and CI Europe
Assuming the 90 days trading horizon BMO Europe High is expected to under-perform the CI Europe. But the etf apears to be less risky and, when comparing its historical volatility, BMO Europe High is 1.06 times less risky than CI Europe. The etf trades about -0.29 of its potential returns per unit of risk. The CI Europe Hedged is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest 3,192 in CI Europe Hedged on August 29, 2024 and sell it today you would lose (74.00) from holding CI Europe Hedged or give up 2.32% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Europe High vs. CI Europe Hedged
Performance |
| Timeline |
| BMO Europe High |
| CI Europe Hedged |
BMO Europe and CI Europe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Europe and CI Europe
The main advantage of trading using opposite BMO Europe and CI Europe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Europe position performs unexpectedly, CI Europe 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 CI Europe will offset losses from the drop in CI Europe's long position.| BMO Europe vs. BMO Europe High | BMO Europe vs. BMO High Dividend | BMO Europe vs. BMO Covered Call | BMO Europe vs. BMO Global High |
| CI Europe vs. NBI High Yield | CI Europe vs. NBI Unconstrained Fixed | CI Europe vs. Mackenzie Developed ex North | CI Europe vs. BMO Short Term Bond |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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