Correlation Between BMO Discount and Dynamic Active
Can any of the company-specific risk be diversified away by investing in both BMO Discount and Dynamic Active 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 Discount and Dynamic Active into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Discount Bond and Dynamic Active Tactical, you can compare the effects of market volatilities on BMO Discount and Dynamic Active 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 Discount with a short position of Dynamic Active. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Discount and Dynamic Active.
Diversification Opportunities for BMO Discount and Dynamic Active
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between BMO and Dynamic is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding BMO Discount Bond and Dynamic Active Tactical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dynamic Active Tactical and BMO Discount 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 Discount Bond are associated (or correlated) with Dynamic Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dynamic Active Tactical has no effect on the direction of BMO Discount i.e., BMO Discount and Dynamic Active go up and down completely randomly.
Pair Corralation between BMO Discount and Dynamic Active
Assuming the 90 days trading horizon BMO Discount Bond is expected to generate 1.01 times more return on investment than Dynamic Active. However, BMO Discount is 1.01 times more volatile than Dynamic Active Tactical. It trades about 0.05 of its potential returns per unit of risk. Dynamic Active Tactical is currently generating about 0.04 per unit of risk. If you would invest 1,371 in BMO Discount Bond on September 23, 2024 and sell it today you would earn a total of 138.00 from holding BMO Discount Bond or generate 10.07% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
BMO Discount Bond vs. Dynamic Active Tactical
Performance |
Timeline |
BMO Discount Bond |
Dynamic Active Tactical |
BMO Discount and Dynamic Active Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with BMO Discount and Dynamic Active
The main advantage of trading using opposite BMO Discount and Dynamic Active positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Discount position performs unexpectedly, Dynamic Active 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 Dynamic Active will offset losses from the drop in Dynamic Active's long position.BMO Discount vs. iShares Core Canadian | BMO Discount vs. iShares Core Canadian | BMO Discount vs. iShares Canadian Real | BMO Discount vs. iShares Canadian Value |
Dynamic Active vs. iShares Core Canadian | Dynamic Active vs. iShares Core Canadian | Dynamic Active vs. iShares Canadian Real | Dynamic Active vs. iShares Canadian Value |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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