Correlation Between BMO Covered and CI Preferred
Can any of the company-specific risk be diversified away by investing in both BMO Covered and CI Preferred 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 CI Preferred 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 CI Preferred Share, you can compare the effects of market volatilities on BMO Covered and CI Preferred 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 CI Preferred. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Covered and CI Preferred.
Diversification Opportunities for BMO Covered and CI Preferred
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between BMO and FPR is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding BMO Covered Call and CI Preferred Share in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CI Preferred Share 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 CI Preferred. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CI Preferred Share has no effect on the direction of BMO Covered i.e., BMO Covered and CI Preferred go up and down completely randomly.
Pair Corralation between BMO Covered and CI Preferred
Assuming the 90 days trading horizon BMO Covered Call is expected to generate 1.4 times more return on investment than CI Preferred. However, BMO Covered is 1.4 times more volatile than CI Preferred Share. It trades about 0.05 of its potential returns per unit of risk. CI Preferred Share is currently generating about -0.02 per unit of risk. If you would invest 1,101 in BMO Covered Call on August 25, 2024 and sell it today you would earn a total of 12.00 from holding BMO Covered Call or generate 1.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Covered Call vs. CI Preferred Share
Performance |
| Timeline |
| BMO Covered Call |
| CI Preferred Share |
BMO Covered and CI Preferred Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Covered and CI Preferred
The main advantage of trading using opposite BMO Covered and CI Preferred positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Covered position performs unexpectedly, CI Preferred 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 Preferred will offset losses from the drop in CI Preferred's long position.| BMO Covered vs. iShares SPTSX Capped | BMO Covered vs. BMO Equal Weight | BMO Covered vs. BMO SPTSX Equal | BMO Covered vs. BMO Equal Weight |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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