Correlation Between Dow Jones and BMO Balanced
Can any of the company-specific risk be diversified away by investing in both Dow Jones and BMO Balanced 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 Dow Jones and BMO Balanced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and BMO Balanced ETF, you can compare the effects of market volatilities on Dow Jones and BMO Balanced 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 Dow Jones with a short position of BMO Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and BMO Balanced.
Diversification Opportunities for Dow Jones and BMO Balanced
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dow and BMO is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and BMO Balanced ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Balanced ETF and Dow Jones 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 Dow Jones Industrial are associated (or correlated) with BMO Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Balanced ETF has no effect on the direction of Dow Jones i.e., Dow Jones and BMO Balanced go up and down completely randomly.
Pair Corralation between Dow Jones and BMO Balanced
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.13 times less return on investment than BMO Balanced. In addition to that, Dow Jones is 1.38 times more volatile than BMO Balanced ETF. It trades about 0.09 of its total potential returns per unit of risk. BMO Balanced ETF is currently generating about 0.15 per unit of volatility. If you would invest 1,044 in BMO Balanced ETF on September 4, 2025 and sell it today you would earn a total of 49.00 from holding BMO Balanced ETF or generate 4.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. BMO Balanced ETF
Performance |
| Timeline |
Dow Jones and BMO Balanced Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
BMO Balanced ETF
Pair trading matchups for BMO Balanced
Pair Trading with Dow Jones and BMO Balanced
The main advantage of trading using opposite Dow Jones and BMO Balanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, BMO Balanced 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 Balanced will offset losses from the drop in BMO Balanced's long position.| Dow Jones vs. Apartment Investment and | Dow Jones vs. Franklin Wireless Corp | Dow Jones vs. Vinci Partners Investments | Dow Jones vs. Delaware Investments Florida |
| BMO Balanced vs. BMO Short Term Bond | BMO Balanced vs. BMO SPDR Consumer | BMO Balanced vs. BMO Canadian Bank | BMO Balanced vs. BMO SPDR Real |
Check out your portfolio center.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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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