Correlation Between BMO Covered and Forstrong Global
Can any of the company-specific risk be diversified away by investing in both BMO Covered 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 Covered 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 Covered Call and Forstrong Global Income, you can compare the effects of market volatilities on BMO Covered 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 Covered with a short position of Forstrong Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Covered and Forstrong Global.
Diversification Opportunities for BMO Covered and Forstrong Global
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BMO and Forstrong is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding BMO Covered Call 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 Covered 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 Covered Call 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 Covered i.e., BMO Covered and Forstrong Global go up and down completely randomly.
Pair Corralation between BMO Covered and Forstrong Global
Assuming the 90 days trading horizon BMO Covered Call is expected to generate 1.43 times more return on investment than Forstrong Global. However, BMO Covered is 1.43 times more volatile than Forstrong Global Income. It trades about 0.13 of its potential returns per unit of risk. Forstrong Global Income is currently generating about -0.08 per unit of risk. If you would invest 1,094 in BMO Covered Call on September 1, 2024 and sell it today you would earn a total of 15.00 from holding BMO Covered Call or generate 1.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Covered Call vs. Forstrong Global Income
Performance |
| Timeline |
| BMO Covered Call |
| Forstrong Global Income |
BMO Covered and Forstrong Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Covered and Forstrong Global
The main advantage of trading using opposite BMO Covered and Forstrong Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Covered 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 Covered vs. BMO Covered Call | BMO Covered vs. BMO Canadian High | BMO Covered vs. BMO Europe High | BMO Covered vs. Harvest Healthcare Leaders |
| 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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