Correlation Between BMO Women and BMO SIA
Can any of the company-specific risk be diversified away by investing in both BMO Women and BMO SIA 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 Women and BMO SIA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Women In and BMO SIA Focused, you can compare the effects of market volatilities on BMO Women and BMO SIA 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 Women with a short position of BMO SIA. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Women and BMO SIA.
Diversification Opportunities for BMO Women and BMO SIA
No risk reduction
The 3 months correlation between BMO and BMO is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding BMO Women In and BMO SIA Focused in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO SIA Focused and BMO Women 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 Women In are associated (or correlated) with BMO SIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO SIA Focused has no effect on the direction of BMO Women i.e., BMO Women and BMO SIA go up and down completely randomly.
Pair Corralation between BMO Women and BMO SIA
Assuming the 90 days trading horizon BMO Women is expected to generate 1.49 times less return on investment than BMO SIA. But when comparing it to its historical volatility, BMO Women In is 1.23 times less risky than BMO SIA. It trades about 0.21 of its potential returns per unit of risk. BMO SIA Focused is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 5,129 in BMO SIA Focused on September 15, 2024 and sell it today you would earn a total of 620.00 from holding BMO SIA Focused or generate 12.09% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
BMO Women In vs. BMO SIA Focused
Performance |
Timeline |
BMO Women In |
BMO SIA Focused |
BMO Women and BMO SIA Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with BMO Women and BMO SIA
The main advantage of trading using opposite BMO Women and BMO SIA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Women position performs unexpectedly, BMO SIA 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 SIA will offset losses from the drop in BMO SIA's long position.BMO Women vs. BMO Mid Federal | BMO Women vs. BMO High Yield | BMO Women vs. iShares Core Canadian | BMO Women vs. BMO Short Corporate |
BMO SIA vs. BMO Mid Federal | BMO SIA vs. BMO High Yield | BMO SIA vs. iShares Core Canadian | BMO SIA vs. BMO Short Corporate |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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