Correlation Between Capital Group and BMO Concentrated

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

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

Diversification Opportunities for Capital Group and BMO Concentrated

0.42

Correlation Coefficient

Capital Group  BMO Concentrated

Very weak diversification

The 3 months correlation between Capital and BMO is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Capital Group Global and BMO Concentrated Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Concentrated Global and Capital Group 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 Capital Group Global are associated (or correlated) with BMO Concentrated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Concentrated Global has no effect on the direction of Capital Group i.e., Capital Group and BMO Concentrated go up and down completely randomly.

Pair Corralation between Capital Group and BMO Concentrated

Assuming the 90 days trading horizon Capital Group Global is expected to generate 1.18 times more return on investment than BMO Concentrated. However, Capital Group is 1.18 times more volatile than BMO Concentrated Global. It trades about 0.01 of its potential returns per unit of risk. BMO Concentrated Global is currently generating about -0.02 per unit of risk. If you would invest  6,178  in Capital Group Global on December 1, 2024 and sell it today you would earn a total of  17.00  from holding Capital Group Global or generate 0.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Capital Group Global  vs.  BMO Concentrated Global

Capital Group Global

Risk-Adjusted Performance

Very Weak

Over the last 90 days Capital Group Global has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong technical and fundamental indicators, Capital Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with Capital Group and BMO Concentrated

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

The idea behind Capital Group Global and BMO Concentrated 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.