Correlation Between Dynamic Active and BMO Covered
Can any of the company-specific risk be diversified away by investing in both Dynamic Active and BMO Covered 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 Dynamic Active and BMO Covered into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dynamic Active Preferred and BMO Covered Call, you can compare the effects of market volatilities on Dynamic Active and BMO Covered 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 Dynamic Active with a short position of BMO Covered. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dynamic Active and BMO Covered.
Diversification Opportunities for Dynamic Active and BMO Covered
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dynamic and BMO is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Dynamic Active Preferred and BMO Covered Call in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Covered Call and Dynamic Active 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 Dynamic Active Preferred are associated (or correlated) with BMO Covered. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Covered Call has no effect on the direction of Dynamic Active i.e., Dynamic Active and BMO Covered go up and down completely randomly.
Pair Corralation between Dynamic Active and BMO Covered
Assuming the 90 days trading horizon Dynamic Active is expected to generate 1.73 times less return on investment than BMO Covered. In addition to that, Dynamic Active is 1.03 times more volatile than BMO Covered Call. It trades about 0.1 of its total potential returns per unit of risk. BMO Covered Call is currently generating about 0.17 per unit of volatility. If you would invest 998.00 in BMO Covered Call on August 31, 2024 and sell it today you would earn a total of 111.00 from holding BMO Covered Call or generate 11.12% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Dynamic Active Preferred vs. BMO Covered Call
Performance |
Timeline |
Dynamic Active Preferred |
BMO Covered Call |
Dynamic Active and BMO Covered Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Dynamic Active and BMO Covered
The main advantage of trading using opposite Dynamic Active and BMO Covered positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dynamic Active position performs unexpectedly, BMO Covered 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 Covered will offset losses from the drop in BMO Covered's long position.Dynamic Active vs. BMO Covered Call | Dynamic Active vs. Forstrong Global Income | Dynamic Active vs. BMO Aggregate Bond | Dynamic Active vs. iShares Canadian HYBrid |
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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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