Correlation Between BMO High and First Trust

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

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

Diversification Opportunities for BMO High and First Trust

0.88

Correlation Coefficient

BMO High  First Trust

Very poor diversification

The 3 months correlation between BMO and First is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding BMO High Dividend and First Trust Morningstar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Morningstar and BMO High 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 High Dividend are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Morningstar has no effect on the direction of BMO High i.e., BMO High and First Trust go up and down completely randomly.

Pair Corralation between BMO High and First Trust

Assuming the 90 days trading horizon BMO High Dividend is expected to generate 1.4 times more return on investment than First Trust. However, BMO High is 1.4 times more volatile than First Trust Morningstar. It trades about 0.22 of its potential returns per unit of risk. First Trust Morningstar is currently generating about 0.23 per unit of risk. If you would invest  2,153  in BMO High Dividend on April 22, 2025 and sell it today you would earn a total of  226.00  from holding BMO High Dividend or generate 10.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.41%
Values	Daily Returns

BMO High Dividend  vs.  First Trust Morningstar

BMO High Dividend

Risk-Adjusted Performance

Solid

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

First Trust Morningstar

Risk-Adjusted Performance

Solid

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

Pair Trading with BMO High and First Trust

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

The idea behind BMO High Dividend and First Trust Morningstar 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.