Correlation Between Purpose Canadian and BMO Dividend

Can any of the company-specific risk be diversified away by investing in both Purpose Canadian and BMO Dividend 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 Purpose Canadian and BMO Dividend into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Purpose Canadian Financial and BMO Dividend ETF, you can compare the effects of market volatilities on Purpose Canadian and BMO Dividend 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 Purpose Canadian with a short position of BMO Dividend. Check out your portfolio center. Please also check ongoing floating volatility patterns of Purpose Canadian and BMO Dividend.

Diversification Opportunities for Purpose Canadian and BMO Dividend

0.64

Correlation Coefficient

Purpose Canadian  BMO Dividend

Poor diversification

The 3 months correlation between Purpose and BMO is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Purpose Canadian Financial and BMO Dividend ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Dividend ETF and Purpose Canadian 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 Purpose Canadian Financial are associated (or correlated) with BMO Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Dividend ETF has no effect on the direction of Purpose Canadian i.e., Purpose Canadian and BMO Dividend go up and down completely randomly.

Pair Corralation between Purpose Canadian and BMO Dividend

Assuming the 90 days trading horizon Purpose Canadian Financial is expected to generate 0.87 times more return on investment than BMO Dividend. However, Purpose Canadian Financial is 1.15 times less risky than BMO Dividend. It trades about 0.37 of its potential returns per unit of risk. BMO Dividend ETF is currently generating about 0.27 per unit of risk. If you would invest  2,783  in Purpose Canadian Financial on August 31, 2024 and sell it today you would earn a total of  165.00  from holding Purpose Canadian Financial or generate 5.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Purpose Canadian Financial  vs.  BMO Dividend ETF

Purpose Canadian Fin

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Purpose Canadian Financial are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Purpose Canadian may actually be approaching a critical reversion point that can send shares even higher in December 2024.

BMO Dividend ETF

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BMO Dividend ETF are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, BMO Dividend may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Purpose Canadian and BMO Dividend

The main advantage of trading using opposite Purpose Canadian and BMO Dividend positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Purpose Canadian position performs unexpectedly, BMO Dividend 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 Dividend will offset losses from the drop in BMO Dividend's long position.

The idea behind Purpose Canadian Financial and BMO Dividend ETF pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.