Correlation Between Astar and BMO BBB

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

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

Diversification Opportunities for Astar and BMO BBB

0.0

Correlation Coefficient

Astar  BMO BBB

Pay attention - limited upside

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

Pair Corralation between Astar and BMO BBB

Assuming the 90 days trading horizon Astar is expected to generate 21.56 times more return on investment than BMO BBB. However, Astar is 21.56 times more volatile than BMO BBB Corporate. It trades about 0.02 of its potential returns per unit of risk. BMO BBB Corporate is currently generating about 0.09 per unit of risk. If you would invest  5.48  in Astar on October 25, 2024 and sell it today you would lose (0.14) from holding Astar or give up 2.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Astar  vs.  BMO BBB Corporate

Astar

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Astar are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Astar may actually be approaching a critical reversion point that can send shares even higher in February 2025.

BMO BBB Corporate

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BMO BBB Corporate are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, BMO BBB is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Astar and BMO BBB

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

The idea behind Astar and BMO BBB Corporate 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.