Correlation Between BMO Global and Fidelity International

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

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

Diversification Opportunities for BMO Global and Fidelity International

0.84

Correlation Coefficient

BMO Global  Fidelity International

Very poor diversification

The 3 months correlation between BMO and Fidelity is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding BMO Global Communications and Fidelity International High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity International and BMO 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 BMO Global Communications are associated (or correlated) with Fidelity International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity International has no effect on the direction of BMO Global i.e., BMO Global and Fidelity International go up and down completely randomly.

Pair Corralation between BMO Global and Fidelity International

Assuming the 90 days trading horizon BMO Global Communications is expected to under-perform the Fidelity International. But the etf apears to be less risky and, when comparing its historical volatility, BMO Global Communications is 1.06 times less risky than Fidelity International. The etf trades about -0.08 of its potential returns per unit of risk. The Fidelity International High is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  4,120  in Fidelity International High on December 5, 2024 and sell it today you would earn a total of  92.00  from holding Fidelity International High or generate 2.23% return on investment over 90 days.

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

BMO Global Communications  vs.  Fidelity International High

BMO Global Communications

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BMO Global Communications are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, BMO Global is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Fidelity International

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity International High are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Fidelity International is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with BMO Global and Fidelity International

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

The idea behind BMO Global Communications and Fidelity International High 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.