Correlation Between Fidelity Global and BMO Concentrated

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

By analyzing existing cross correlation between Fidelity Global Equity and BMO Concentrated Global, you can compare the effects of market volatilities on Fidelity Global and BMO Concentrated 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 Concentrated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Global and BMO Concentrated.

Diversification Opportunities for Fidelity Global and BMO Concentrated

0.94

Correlation Coefficient

Fidelity Global  BMO Concentrated

Almost no diversification

The 3 months correlation between Fidelity and BMO is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Global Equity and BMO Concentrated Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Concentrated Global 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 Equity are associated (or correlated) with BMO Concentrated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Concentrated Global has no effect on the direction of Fidelity Global i.e., Fidelity Global and BMO Concentrated go up and down completely randomly.

Pair Corralation between Fidelity Global and BMO Concentrated

Assuming the 90 days trading horizon Fidelity Global Equity is expected to generate 0.99 times more return on investment than BMO Concentrated. However, Fidelity Global Equity is 1.01 times less risky than BMO Concentrated. It trades about 0.33 of its potential returns per unit of risk. BMO Concentrated Global is currently generating about 0.22 per unit of risk. If you would invest  1,004  in Fidelity Global Equity on September 3, 2024 and sell it today you would earn a total of  105.00  from holding Fidelity Global Equity or generate 10.46% return on investment over 90 days.

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

Fidelity Global Equity  vs.  BMO Concentrated Global

Fidelity Global Equity

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Global Equity are ranked lower than 25 (%) of all funds and portfolios of funds over the last 90 days. In spite of very weak basic indicators, Fidelity Global may actually be approaching a critical reversion point that can send shares even higher in January 2025.

BMO Concentrated Global

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BMO Concentrated Global are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather unfluctuating fundamental indicators, BMO Concentrated may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Fidelity Global and BMO Concentrated

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

The idea behind Fidelity Global Equity and BMO Concentrated 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.