Correlation Between CIBC Flexible and BMO Global

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

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

Diversification Opportunities for CIBC Flexible and BMO Global

0.82

Correlation Coefficient

CIBC Flexible  BMO Global

Very poor diversification

The 3 months correlation between CIBC and BMO is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding CIBC Flexible Yield and BMO Global Consumer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Global Consumer and CIBC Flexible 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 CIBC Flexible Yield are associated (or correlated) with BMO Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Global Consumer has no effect on the direction of CIBC Flexible i.e., CIBC Flexible and BMO Global go up and down completely randomly.

Pair Corralation between CIBC Flexible and BMO Global

Assuming the 90 days trading horizon CIBC Flexible is expected to generate 12.04 times less return on investment than BMO Global. But when comparing it to its historical volatility, CIBC Flexible Yield is 6.21 times less risky than BMO Global. It trades about 0.11 of its potential returns per unit of risk. BMO Global Consumer is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  3,957  in BMO Global Consumer on October 25, 2024 and sell it today you would earn a total of  469.00  from holding BMO Global Consumer or generate 11.85% return on investment over 90 days.

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

CIBC Flexible Yield  vs.  BMO Global Consumer

CIBC Flexible Yield

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CIBC Flexible Yield are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, CIBC Flexible is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

BMO Global Consumer

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BMO Global Consumer are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, BMO Global may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with CIBC Flexible and BMO Global

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

The idea behind CIBC Flexible Yield and BMO Global Consumer 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.