Correlation Between CI Global and BMO Global

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

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

Diversification Opportunities for CI Global and BMO Global

0.39

Correlation Coefficient

CI Global  BMO Global

Weak diversification

The 3 months correlation between CGRA and BMO is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding CI Global Real 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 CI Global 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 CI Global Real 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 CI Global i.e., CI Global and BMO Global go up and down completely randomly.

Pair Corralation between CI Global and BMO Global

Assuming the 90 days trading horizon CI Global is expected to generate 1.83 times less return on investment than BMO Global. But when comparing it to its historical volatility, CI Global Real is 1.16 times less risky than BMO Global. It trades about 0.07 of its potential returns per unit of risk. BMO Global Consumer is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  3,260  in BMO Global Consumer on September 12, 2024 and sell it today you would earn a total of  1,168  from holding BMO Global Consumer or generate 35.83% return on investment over 90 days.

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

CI Global Real  vs.  BMO Global Consumer

CI Global Real

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CI Global Real are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, CI Global 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

22 of 100

Solid

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

Pair Trading with CI Global and BMO Global

The main advantage of trading using opposite CI Global and BMO Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CI Global 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 CI Global Real 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.