Correlation Between BMO Global and TD Active

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

Diversification Opportunities for BMO Global and TD Active

0.91

Correlation Coefficient

BMO Global  TD Active

Almost no diversification

The 3 months correlation between BMO and TGED is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding BMO Global Consumer and TD Active Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TD Active 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 TD Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TD Active Global has no effect on the direction of BMO Global i.e., BMO Global and TD Active go up and down completely randomly.

Pair Corralation between BMO Global and TD Active

Assuming the 90 days trading horizon BMO Global Consumer is expected to under-perform the TD Active. In addition to that, BMO Global is 1.03 times more volatile than TD Active Global. It trades about -0.11 of its total potential returns per unit of risk. TD Active Global is currently generating about -0.08 per unit of volatility. If you would invest  2,750  in TD Active Global on December 21, 2024 and sell it today you would lose (150.00) from holding TD Active Global or give up 5.45% of portfolio value over 90 days.

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

BMO Global Consumer  vs.  TD Active 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 unfluctuating 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.

TD Active Global

Risk-Adjusted Performance

Very Weak

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

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

The idea behind BMO Global Consumer and TD Active 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 Commodity Directory module to find actively traded commodities issued by global exchanges.