Correlation Between Fidelity Advantage and BMO Balanced

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

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

Diversification Opportunities for Fidelity Advantage and BMO Balanced

0.28

Correlation Coefficient

Fidelity Advantage  BMO Balanced

Modest diversification

The 3 months correlation between Fidelity and BMO is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Advantage Ether and BMO Balanced ESG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Balanced ESG and Fidelity Advantage 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 Advantage Ether are associated (or correlated) with BMO Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Balanced ESG has no effect on the direction of Fidelity Advantage i.e., Fidelity Advantage and BMO Balanced go up and down completely randomly.

Pair Corralation between Fidelity Advantage and BMO Balanced

Assuming the 90 days trading horizon Fidelity Advantage Ether is expected to under-perform the BMO Balanced. In addition to that, Fidelity Advantage is 8.34 times more volatile than BMO Balanced ESG. It trades about -0.18 of its total potential returns per unit of risk. BMO Balanced ESG is currently generating about -0.01 per unit of volatility. If you would invest  3,823  in BMO Balanced ESG on December 29, 2024 and sell it today you would lose (18.00) from holding BMO Balanced ESG or give up 0.47% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Fidelity Advantage Ether  vs.  BMO Balanced ESG

Fidelity Advantage Ether

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity Advantage Ether 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 April 2025. The recent disarray may also be a sign of long period up-swing for the ETF investors.

BMO Balanced ESG

Risk-Adjusted Performance

Very Weak

Over the last 90 days BMO Balanced ESG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, BMO Balanced 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 Advantage and BMO Balanced

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

The idea behind Fidelity Advantage Ether and BMO Balanced ESG 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.