Correlation Between Brompton Global and BMO Premium

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

By analyzing existing cross correlation between Brompton Global Dividend and BMO Premium Yield, you can compare the effects of market volatilities on Brompton Global 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 Brompton Global with a short position of BMO Premium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brompton Global and BMO Premium.

Diversification Opportunities for Brompton Global and BMO Premium

0.91

Correlation Coefficient

Brompton Global  BMO Premium

Almost no diversification

The 3 months correlation between Brompton and BMO is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Brompton Global Dividend 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 Brompton Global 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 Brompton Global Dividend 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 Brompton Global i.e., Brompton Global and BMO Premium go up and down completely randomly.

Pair Corralation between Brompton Global and BMO Premium

Assuming the 90 days trading horizon Brompton Global Dividend is expected to generate 1.72 times more return on investment than BMO Premium. However, Brompton Global is 1.72 times more volatile than BMO Premium Yield. It trades about 0.15 of its potential returns per unit of risk. BMO Premium Yield is currently generating about 0.22 per unit of risk. If you would invest  2,125  in Brompton Global Dividend on September 1, 2024 and sell it today you would earn a total of  152.00  from holding Brompton Global Dividend or generate 7.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Brompton Global Dividend  vs.  BMO Premium Yield

Brompton Global Dividend

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Brompton Global Dividend are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Brompton Global may actually be approaching a critical reversion point that can send shares even higher in December 2024.

BMO Premium Yield

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BMO Premium Yield are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, BMO Premium is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Brompton Global and BMO Premium

The main advantage of trading using opposite Brompton Global and BMO Premium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brompton Global 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.

The idea behind Brompton Global Dividend and BMO Premium Yield 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.