Correlation Between EcoSynthetix and BMO Clean

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

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

Diversification Opportunities for EcoSynthetix and BMO Clean

0.75

Correlation Coefficient

EcoSynthetix  BMO Clean

Poor diversification

The 3 months correlation between EcoSynthetix and BMO is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding EcoSynthetix and BMO Clean Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Clean Energy and EcoSynthetix 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 EcoSynthetix are associated (or correlated) with BMO Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Clean Energy has no effect on the direction of EcoSynthetix i.e., EcoSynthetix and BMO Clean go up and down completely randomly.

Pair Corralation between EcoSynthetix and BMO Clean

Assuming the 90 days trading horizon EcoSynthetix is expected to generate 1.62 times more return on investment than BMO Clean. However, EcoSynthetix is 1.62 times more volatile than BMO Clean Energy. It trades about -0.02 of its potential returns per unit of risk. BMO Clean Energy is currently generating about -0.2 per unit of risk. If you would invest  438.00  in EcoSynthetix on September 17, 2024 and sell it today you would lose (18.00) from holding EcoSynthetix or give up 4.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

EcoSynthetix  vs.  BMO Clean Energy

EcoSynthetix

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EcoSynthetix has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, EcoSynthetix is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

BMO Clean Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BMO Clean Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Etf's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the ETF investors.

Pair Trading with EcoSynthetix and BMO Clean

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

The idea behind EcoSynthetix and BMO Clean Energy 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.