Correlation Between Fidelity Global and BMO SP

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

By analyzing existing cross correlation between Fidelity Global Monthly and BMO SP 500, you can compare the effects of market volatilities on Fidelity Global and BMO SP 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 Fidelity Global with a short position of BMO SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Global and BMO SP.

Diversification Opportunities for Fidelity Global and BMO SP

-0.27

Correlation Coefficient

Fidelity Global  BMO SP

Very good diversification

The 3 months correlation between Fidelity and BMO is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Global Monthly and BMO SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO SP 500 and Fidelity 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 Fidelity Global Monthly are associated (or correlated) with BMO SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO SP 500 has no effect on the direction of Fidelity Global i.e., Fidelity Global and BMO SP go up and down completely randomly.

Pair Corralation between Fidelity Global and BMO SP

Assuming the 90 days trading horizon Fidelity Global Monthly is expected to generate 0.49 times more return on investment than BMO SP. However, Fidelity Global Monthly is 2.06 times less risky than BMO SP. It trades about 0.11 of its potential returns per unit of risk. BMO SP 500 is currently generating about -0.09 per unit of risk. If you would invest  1,383  in Fidelity Global Monthly on December 22, 2024 and sell it today you would earn a total of  42.00  from holding Fidelity Global Monthly or generate 3.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Fidelity Global Monthly  vs.  BMO SP 500

Fidelity Global Monthly

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Global Monthly are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Fidelity Global is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

BMO SP 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days BMO SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, BMO SP is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Fidelity Global and BMO SP

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

The idea behind Fidelity Global Monthly and BMO SP 500 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.

Check out your portfolio center.

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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.