Correlation Between First Asset and BMO Premium
Can any of the company-specific risk be diversified away by investing in both First Asset and BMO Premium 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 First Asset and BMO Premium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Asset Energy and BMO Premium Yield, you can compare the effects of market volatilities on First Asset and BMO Premium 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 First Asset with a short position of BMO Premium. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Asset and BMO Premium.
Diversification Opportunities for First Asset and BMO Premium
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between First and BMO is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding First Asset Energy and BMO Premium Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Premium Yield and First Asset 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 First Asset Energy are associated (or correlated) with BMO Premium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Premium Yield has no effect on the direction of First Asset i.e., First Asset and BMO Premium go up and down completely randomly.
Pair Corralation between First Asset and BMO Premium
Assuming the 90 days trading horizon First Asset is expected to generate 10.16 times less return on investment than BMO Premium. In addition to that, First Asset is 2.57 times more volatile than BMO Premium Yield. It trades about 0.01 of its total potential returns per unit of risk. BMO Premium Yield is currently generating about 0.27 per unit of volatility. If you would invest 3,064 in BMO Premium Yield on September 6, 2024 and sell it today you would earn a total of 238.00 from holding BMO Premium Yield or generate 7.77% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
First Asset Energy vs. BMO Premium Yield
Performance |
Timeline |
First Asset Energy |
BMO Premium Yield |
First Asset and BMO Premium Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with First Asset and BMO Premium
The main advantage of trading using opposite First Asset and BMO Premium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Asset position performs unexpectedly, BMO Premium 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 Premium will offset losses from the drop in BMO Premium's long position.First Asset vs. CI Gold Giants | First Asset vs. First Asset Tech | First Asset vs. CI Canada Lifeco | First Asset vs. Harvest Healthcare Leaders |
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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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