Correlation Between Fidelity International and BMO Global

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

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

Diversification Opportunities for Fidelity International and BMO Global

0.29

Correlation Coefficient

Fidelity International  BMO Global

Modest diversification

The 3 months correlation between Fidelity and BMO is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity International High and BMO Global Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Global Communications and Fidelity International 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 International High are associated (or correlated) with BMO Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Global Communications has no effect on the direction of Fidelity International i.e., Fidelity International and BMO Global go up and down completely randomly.

Pair Corralation between Fidelity International and BMO Global

Assuming the 90 days trading horizon Fidelity International is expected to generate 1.85 times less return on investment than BMO Global. But when comparing it to its historical volatility, Fidelity International High is 1.11 times less risky than BMO Global. It trades about 0.25 of its potential returns per unit of risk. BMO Global Communications is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest  3,926  in BMO Global Communications on September 16, 2024 and sell it today you would earn a total of  262.00  from holding BMO Global Communications or generate 6.67% return on investment over 90 days.

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

Fidelity International High  vs.  BMO Global Communications

Fidelity International

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity International High are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Fidelity International is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

BMO Global Communications

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in BMO Global Communications are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, BMO Global displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fidelity International and BMO Global

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

The idea behind Fidelity International High and BMO Global Communications 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.