Correlation Between BMO Global and Desjardins

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

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

Diversification Opportunities for BMO Global and Desjardins

0.61

Correlation Coefficient

BMO Global  Desjardins

Poor diversification

The 3 months correlation between BMO and Desjardins is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding BMO Global Consumer and Desjardins RI Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Desjardins RI Global 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 Consumer are associated (or correlated) with Desjardins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Desjardins RI Global has no effect on the direction of BMO Global i.e., BMO Global and Desjardins go up and down completely randomly.

Pair Corralation between BMO Global and Desjardins

Assuming the 90 days trading horizon BMO Global Consumer is expected to under-perform the Desjardins. In addition to that, BMO Global is 1.43 times more volatile than Desjardins RI Global. It trades about -0.09 of its total potential returns per unit of risk. Desjardins RI Global is currently generating about 0.0 per unit of volatility. If you would invest  3,138  in Desjardins RI Global on December 31, 2024 and sell it today you would lose (7.00) from holding Desjardins RI Global or give up 0.22% of portfolio value over 90 days.

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

BMO Global Consumer  vs.  Desjardins RI Global

BMO Global Consumer

Risk-Adjusted Performance

Very Weak

Over the last 90 days BMO Global Consumer has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Desjardins RI Global

Risk-Adjusted Performance

Very Weak

Over the last 90 days Desjardins RI Global has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Desjardins 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 Desjardins

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

The idea behind BMO Global Consumer and Desjardins RI 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.