Correlation Between BMO Global and Accelerate OneChoice

Can any of the company-specific risk be diversified away by investing in both BMO Global and Accelerate OneChoice 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 Accelerate OneChoice 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 Accelerate OneChoice Alternative, you can compare the effects of market volatilities on BMO Global and Accelerate OneChoice 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 Accelerate OneChoice. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Global and Accelerate OneChoice.

Diversification Opportunities for BMO Global and Accelerate OneChoice

0.7

Correlation Coefficient

BMO Global  Accelerate OneChoice

Poor diversification

The 3 months correlation between BMO and Accelerate is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding BMO Global Communications and Accelerate OneChoice Alternati in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Accelerate OneChoice 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 Accelerate OneChoice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Accelerate OneChoice has no effect on the direction of BMO Global i.e., BMO Global and Accelerate OneChoice go up and down completely randomly.

Pair Corralation between BMO Global and Accelerate OneChoice

Assuming the 90 days trading horizon BMO Global Communications is expected to generate 2.0 times more return on investment than Accelerate OneChoice. However, BMO Global is 2.0 times more volatile than Accelerate OneChoice Alternative. It trades about 0.16 of its potential returns per unit of risk. Accelerate OneChoice Alternative is currently generating about 0.07 per unit of risk. If you would invest  3,806  in BMO Global Communications on October 20, 2024 and sell it today you would earn a total of  315.00  from holding BMO Global Communications or generate 8.28% return on investment over 90 days.

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

BMO Global Communications  vs.  Accelerate OneChoice Alternati

BMO Global Communications

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BMO Global Communications are ranked lower than 12 (%) 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.

Accelerate OneChoice

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Accelerate OneChoice Alternative are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Accelerate OneChoice 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 Accelerate OneChoice

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

The idea behind BMO Global Communications and Accelerate OneChoice Alternative 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.