Correlation Between BMO NASDAQ and Harvest Premium

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

By analyzing existing cross correlation between BMO NASDAQ 100 and Harvest Premium Yield, you can compare the effects of market volatilities on BMO NASDAQ and Harvest 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 BMO NASDAQ with a short position of Harvest Premium. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO NASDAQ and Harvest Premium.

Diversification Opportunities for BMO NASDAQ and Harvest Premium

-0.39

Correlation Coefficient

BMO NASDAQ  Harvest Premium

Very good diversification

The 3 months correlation between BMO and Harvest is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding BMO NASDAQ 100 and Harvest Premium Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harvest Premium Yield and BMO NASDAQ 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 NASDAQ 100 are associated (or correlated) with Harvest Premium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harvest Premium Yield has no effect on the direction of BMO NASDAQ i.e., BMO NASDAQ and Harvest Premium go up and down completely randomly.

Pair Corralation between BMO NASDAQ and Harvest Premium

Assuming the 90 days trading horizon BMO NASDAQ 100 is expected to under-perform the Harvest Premium. In addition to that, BMO NASDAQ is 1.29 times more volatile than Harvest Premium Yield. It trades about -0.16 of its total potential returns per unit of risk. Harvest Premium Yield is currently generating about 0.31 per unit of volatility. If you would invest  941.00  in Harvest Premium Yield on December 2, 2024 and sell it today you would earn a total of  45.00  from holding Harvest Premium Yield or generate 4.78% return on investment over 90 days.

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

BMO NASDAQ 100  vs.  Harvest Premium Yield

BMO NASDAQ 100

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BMO NASDAQ 100 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, BMO NASDAQ is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Harvest Premium Yield

Risk-Adjusted Performance

Very Weak

Over the last 90 days Harvest Premium Yield has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Harvest Premium is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with BMO NASDAQ and Harvest Premium

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

The idea behind BMO NASDAQ 100 and Harvest 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.