Correlation Between BMO Balanced and Harvest Balanced

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

By analyzing existing cross correlation between BMO Balanced ESG and Harvest Balanced Income, you can compare the effects of market volatilities on BMO Balanced and Harvest Balanced 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 Balanced with a short position of Harvest Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Balanced and Harvest Balanced.

Diversification Opportunities for BMO Balanced and Harvest Balanced

0.57

Correlation Coefficient

BMO Balanced  Harvest Balanced

Very weak diversification

The 3 months correlation between BMO and Harvest is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding BMO Balanced ESG and Harvest Balanced Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harvest Balanced Income and BMO Balanced 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 Balanced ESG are associated (or correlated) with Harvest Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harvest Balanced Income has no effect on the direction of BMO Balanced i.e., BMO Balanced and Harvest Balanced go up and down completely randomly.

Pair Corralation between BMO Balanced and Harvest Balanced

Assuming the 90 days trading horizon BMO Balanced ESG is expected to generate 1.05 times more return on investment than Harvest Balanced. However, BMO Balanced is 1.05 times more volatile than Harvest Balanced Income. It trades about 0.26 of its potential returns per unit of risk. Harvest Balanced Income is currently generating about 0.04 per unit of risk. If you would invest  3,665  in BMO Balanced ESG on September 12, 2024 and sell it today you would earn a total of  237.00  from holding BMO Balanced ESG or generate 6.47% return on investment over 90 days.

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

BMO Balanced ESG  vs.  Harvest Balanced Income

BMO Balanced ESG

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BMO Balanced ESG are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, BMO Balanced may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Harvest Balanced Income

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Harvest Balanced Income are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Harvest Balanced is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with BMO Balanced and Harvest Balanced

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

The idea behind BMO Balanced ESG and Harvest Balanced Income 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.