Correlation Between BMO Europe and BMO High
Can any of the company-specific risk be diversified away by investing in both BMO Europe 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 Europe 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 Europe High and BMO High Yield, you can compare the effects of market volatilities on BMO Europe 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 Europe with a short position of BMO High. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Europe and BMO High.
Diversification Opportunities for BMO Europe and BMO High
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between BMO and BMO is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding BMO Europe High and BMO High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO High Yield 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 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 Yield has no effect on the direction of BMO Europe i.e., BMO Europe and BMO High go up and down completely randomly.
Pair Corralation between BMO Europe and BMO High
Assuming the 90 days trading horizon BMO Europe High is expected to under-perform the BMO High. In addition to that, BMO Europe is 3.02 times more volatile than BMO High Yield. It trades about -0.17 of its total potential returns per unit of risk. BMO High Yield is currently generating about 0.29 per unit of volatility. If you would invest 1,114 in BMO High Yield on September 1, 2024 and sell it today you would earn a total of 19.00 from holding BMO High Yield or generate 1.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Europe High vs. BMO High Yield
Performance |
| Timeline |
| BMO Europe High |
| BMO High Yield |
BMO Europe and BMO High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Europe and BMO High
The main advantage of trading using opposite BMO Europe and BMO High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Europe 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 Europe vs. BMO Europe High | BMO Europe vs. BMO High Dividend | BMO Europe vs. BMO Covered Call | BMO Europe vs. BMO Global High |
| BMO High vs. BMO Mid Federal | BMO High vs. BMO Short Corporate | BMO High vs. BMO Emerging Markets | BMO High vs. BMO Long Corporate |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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