Correlation Between BMO NASDAQ and BMO Tactical

Can any of the company-specific risk be diversified away by investing in both BMO NASDAQ and BMO Tactical 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 BMO Tactical 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 BMO Tactical Dividend, you can compare the effects of market volatilities on BMO NASDAQ and BMO Tactical 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 BMO Tactical. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO NASDAQ and BMO Tactical.

Diversification Opportunities for BMO NASDAQ and BMO Tactical

-0.7

Correlation Coefficient

BMO NASDAQ  BMO Tactical

Excellent diversification

The 3 months correlation between BMO and BMO is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding BMO NASDAQ 100 and BMO Tactical Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Tactical Dividend 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 BMO Tactical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Tactical Dividend has no effect on the direction of BMO NASDAQ i.e., BMO NASDAQ and BMO Tactical go up and down completely randomly.

Pair Corralation between BMO NASDAQ and BMO Tactical

Assuming the 90 days trading horizon BMO NASDAQ 100 is expected to generate 1.77 times more return on investment than BMO Tactical. However, BMO NASDAQ is 1.77 times more volatile than BMO Tactical Dividend. It trades about 0.02 of its potential returns per unit of risk. BMO Tactical Dividend is currently generating about -0.18 per unit of risk. If you would invest  14,939  in BMO NASDAQ 100 on October 8, 2024 and sell it today you would earn a total of  55.00  from holding BMO NASDAQ 100 or generate 0.37% return on investment over 90 days.

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

BMO NASDAQ 100  vs.  BMO Tactical Dividend

BMO NASDAQ 100

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BMO NASDAQ 100 are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, BMO NASDAQ may actually be approaching a critical reversion point that can send shares even higher in February 2025.

BMO Tactical Dividend

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BMO Tactical Dividend has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, BMO Tactical 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 NASDAQ and BMO Tactical

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

The idea behind BMO NASDAQ 100 and BMO Tactical Dividend 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.