Correlation Between BMO Equal and Purpose Core

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

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

Diversification Opportunities for BMO Equal and Purpose Core

0.67

Correlation Coefficient

BMO Equal  Purpose Core

Poor diversification

The 3 months correlation between BMO and Purpose is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding BMO Equal Weight and Purpose Core Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Purpose Core Dividend and BMO Equal 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 Equal Weight are associated (or correlated) with Purpose Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Purpose Core Dividend has no effect on the direction of BMO Equal i.e., BMO Equal and Purpose Core go up and down completely randomly.

Pair Corralation between BMO Equal and Purpose Core

Assuming the 90 days trading horizon BMO Equal Weight is expected to generate 2.14 times more return on investment than Purpose Core. However, BMO Equal is 2.14 times more volatile than Purpose Core Dividend. It trades about 0.22 of its potential returns per unit of risk. Purpose Core Dividend is currently generating about 0.33 per unit of risk. If you would invest  2,029  in BMO Equal Weight on April 24, 2025 and sell it today you would earn a total of  216.00  from holding BMO Equal Weight or generate 10.65% return on investment over 90 days.

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

BMO Equal Weight  vs.  Purpose Core Dividend

BMO Equal Weight

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BMO Equal Weight are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, BMO Equal may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Purpose Core Dividend

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Purpose Core Dividend are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Purpose Core may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with BMO Equal and Purpose Core

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

The idea behind BMO Equal Weight and Purpose Core 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.