Correlation Between 3iQ Bitcoin and BMO Balanced

Can any of the company-specific risk be diversified away by investing in both 3iQ Bitcoin 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 3iQ Bitcoin and BMO Balanced into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 3iQ Bitcoin ETF and BMO Balanced ESG, you can compare the effects of market volatilities on 3iQ Bitcoin 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 3iQ Bitcoin with a short position of BMO Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3iQ Bitcoin and BMO Balanced.

Diversification Opportunities for 3iQ Bitcoin and BMO Balanced

0.92

Correlation Coefficient

3iQ Bitcoin  BMO Balanced

Almost no diversification

The 3 months correlation between 3iQ and BMO is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding 3iQ Bitcoin ETF and BMO Balanced ESG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Balanced ESG and 3iQ Bitcoin 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 3iQ Bitcoin ETF 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 ESG has no effect on the direction of 3iQ Bitcoin i.e., 3iQ Bitcoin and BMO Balanced go up and down completely randomly.

Pair Corralation between 3iQ Bitcoin and BMO Balanced

Assuming the 90 days trading horizon 3iQ Bitcoin ETF is expected to generate 8.8 times more return on investment than BMO Balanced. However, 3iQ Bitcoin is 8.8 times more volatile than BMO Balanced ESG. It trades about 0.29 of its potential returns per unit of risk. BMO Balanced ESG is currently generating about 0.24 per unit of risk. If you would invest  1,257  in 3iQ Bitcoin ETF on September 14, 2024 and sell it today you would earn a total of  1,003  from holding 3iQ Bitcoin ETF or generate 79.79% return on investment over 90 days.

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

3iQ Bitcoin ETF  vs.  BMO Balanced ESG

3iQ Bitcoin ETF

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in 3iQ Bitcoin ETF are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, 3iQ Bitcoin displayed solid returns over the last few months and may actually be approaching a breakup point.

BMO Balanced ESG

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BMO Balanced ESG are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, BMO Balanced is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with 3iQ Bitcoin and BMO Balanced

The main advantage of trading using opposite 3iQ Bitcoin and BMO Balanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3iQ Bitcoin 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.

The idea behind 3iQ Bitcoin ETF and BMO Balanced ESG 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.