Correlation Between PHN Canadian and BMO Concentrated

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

By analyzing existing cross correlation between PHN Canadian Equity and BMO Concentrated Global, you can compare the effects of market volatilities on PHN Canadian and BMO Concentrated 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 PHN Canadian with a short position of BMO Concentrated. Check out your portfolio center. Please also check ongoing floating volatility patterns of PHN Canadian and BMO Concentrated.

Diversification Opportunities for PHN Canadian and BMO Concentrated

0.91

Correlation Coefficient

PHN Canadian  BMO Concentrated

Almost no diversification

The 3 months correlation between PHN and BMO is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding PHN Canadian Equity and BMO Concentrated Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Concentrated Global and PHN Canadian 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 PHN Canadian Equity are associated (or correlated) with BMO Concentrated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Concentrated Global has no effect on the direction of PHN Canadian i.e., PHN Canadian and BMO Concentrated go up and down completely randomly.

Pair Corralation between PHN Canadian and BMO Concentrated

Assuming the 90 days trading horizon PHN Canadian Equity is expected to generate 1.0 times more return on investment than BMO Concentrated. However, PHN Canadian is 1.0 times more volatile than BMO Concentrated Global. It trades about 0.35 of its potential returns per unit of risk. BMO Concentrated Global is currently generating about 0.23 per unit of risk. If you would invest  2,058  in PHN Canadian Equity on September 4, 2024 and sell it today you would earn a total of  229.00  from holding PHN Canadian Equity or generate 11.13% return on investment over 90 days.

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

PHN Canadian Equity  vs.  BMO Concentrated Global

PHN Canadian Equity

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in PHN Canadian Equity are ranked lower than 27 (%) of all funds and portfolios of funds over the last 90 days. In spite of very unfluctuating basic indicators, PHN Canadian may actually be approaching a critical reversion point that can send shares even higher in January 2025.

BMO Concentrated Global

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BMO Concentrated Global are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather inconsistent fundamental indicators, BMO Concentrated may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with PHN Canadian and BMO Concentrated

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

The idea behind PHN Canadian Equity and BMO Concentrated Global 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.