Correlation Between BMO Concentrated and Guardian

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

By analyzing existing cross correlation between BMO Concentrated Global and Guardian i3 Global, you can compare the effects of market volatilities on BMO Concentrated and Guardian 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 Concentrated with a short position of Guardian. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Concentrated and Guardian.

Diversification Opportunities for BMO Concentrated and Guardian

0.0

Correlation Coefficient

BMO Concentrated  Guardian

Pay attention - limited upside

The 3 months correlation between BMO and Guardian is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding BMO Concentrated Global and Guardian i3 Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guardian i3 Global and BMO Concentrated 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 Concentrated Global are associated (or correlated) with Guardian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guardian i3 Global has no effect on the direction of BMO Concentrated i.e., BMO Concentrated and Guardian go up and down completely randomly.

Pair Corralation between BMO Concentrated and Guardian

Assuming the 90 days trading horizon BMO Concentrated Global is expected to generate 1.4 times more return on investment than Guardian. However, BMO Concentrated is 1.4 times more volatile than Guardian i3 Global. It trades about -0.02 of its potential returns per unit of risk. Guardian i3 Global is currently generating about -0.7 per unit of risk. If you would invest  1,880  in BMO Concentrated Global on December 14, 2024 and sell it today you would lose (18.00) from holding BMO Concentrated Global or give up 0.96% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	13.56%
Values	Daily Returns

BMO Concentrated Global  vs.  Guardian i3 Global

BMO Concentrated Global

Risk-Adjusted Performance

Very Weak

Over the last 90 days BMO Concentrated Global has generated negative risk-adjusted returns adding no value to fund investors. In spite of rather sound fundamental indicators, BMO Concentrated is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Guardian i3 Global

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guardian i3 Global has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the fund investors.

Pair Trading with BMO Concentrated and Guardian

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

The idea behind BMO Concentrated Global and Guardian i3 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.