Correlation Between BMO Covered and Harvest Tech

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

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

Diversification Opportunities for BMO Covered and Harvest Tech

0.84

Correlation Coefficient

BMO Covered  Harvest Tech

Very poor diversification

The 3 months correlation between BMO and Harvest is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding BMO Covered Call and Harvest Tech Achievers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harvest Tech Achievers and BMO Covered 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 Covered Call are associated (or correlated) with Harvest Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harvest Tech Achievers has no effect on the direction of BMO Covered i.e., BMO Covered and Harvest Tech go up and down completely randomly.

Pair Corralation between BMO Covered and Harvest Tech

Assuming the 90 days trading horizon BMO Covered Call is expected to generate 1.4 times more return on investment than Harvest Tech. However, BMO Covered is 1.4 times more volatile than Harvest Tech Achievers. It trades about 0.15 of its potential returns per unit of risk. Harvest Tech Achievers is currently generating about 0.07 per unit of risk. If you would invest  2,182  in BMO Covered Call on September 27, 2024 and sell it today you would earn a total of  326.00  from holding BMO Covered Call or generate 14.94% return on investment over 90 days.

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

BMO Covered Call  vs.  Harvest Tech Achievers

BMO Covered Call

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BMO Covered Call are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward-looking signals, BMO Covered displayed solid returns over the last few months and may actually be approaching a breakup point.

Harvest Tech Achievers

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Harvest Tech Achievers are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Harvest Tech 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 Covered and Harvest Tech

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

The idea behind BMO Covered Call and Harvest Tech Achievers 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.