Correlation Between BMO Europe and Forstrong Global
Can any of the company-specific risk be diversified away by investing in both BMO Europe and Forstrong Global 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 Forstrong Global 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 Forstrong Global Income, you can compare the effects of market volatilities on BMO Europe and Forstrong Global 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 Forstrong Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Europe and Forstrong Global.
Diversification Opportunities for BMO Europe and Forstrong Global
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between BMO and Forstrong is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding BMO Europe High and Forstrong Global Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forstrong Global Income 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 Forstrong Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forstrong Global Income has no effect on the direction of BMO Europe i.e., BMO Europe and Forstrong Global go up and down completely randomly.
Pair Corralation between BMO Europe and Forstrong Global
Assuming the 90 days trading horizon BMO Europe High is expected to under-perform the Forstrong Global. In addition to that, BMO Europe is 2.16 times more volatile than Forstrong Global Income. It trades about -0.17 of its total potential returns per unit of risk. Forstrong Global Income is currently generating about -0.08 per unit of volatility. If you would invest 2,175 in Forstrong Global Income on September 1, 2024 and sell it today you would lose (13.00) from holding Forstrong Global Income or give up 0.6% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
BMO Europe High vs. Forstrong Global Income
Performance |
| Timeline |
| BMO Europe High |
| Forstrong Global Income |
BMO Europe and Forstrong Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Europe and Forstrong Global
The main advantage of trading using opposite BMO Europe and Forstrong Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Europe position performs unexpectedly, Forstrong Global 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 Forstrong Global will offset losses from the drop in Forstrong Global'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 |
| Forstrong Global vs. iShares SPTSX 60 | Forstrong Global vs. iShares Core SP | Forstrong Global vs. iShares Core SPTSX | Forstrong Global vs. BMO Aggregate 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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