Correlation Between Generation Mining and BMO Mid

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

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

Diversification Opportunities for Generation Mining and BMO Mid

-0.39

Correlation Coefficient

Generation Mining  BMO Mid

Very good diversification

The 3 months correlation between Generation and BMO is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Generation Mining and BMO Mid Provincial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Mid Provincial and Generation Mining 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 Generation Mining are associated (or correlated) with BMO Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Mid Provincial has no effect on the direction of Generation Mining i.e., Generation Mining and BMO Mid go up and down completely randomly.

Pair Corralation between Generation Mining and BMO Mid

Assuming the 90 days trading horizon Generation Mining is expected to under-perform the BMO Mid. In addition to that, Generation Mining is 18.77 times more volatile than BMO Mid Provincial. It trades about -0.09 of its total potential returns per unit of risk. BMO Mid Provincial is currently generating about -0.16 per unit of volatility. If you would invest  1,410  in BMO Mid Provincial on October 9, 2024 and sell it today you would lose (13.00) from holding BMO Mid Provincial or give up 0.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Generation Mining  vs.  BMO Mid Provincial

Generation Mining

Risk-Adjusted Performance

0 of 100

Very Weak

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

BMO Mid Provincial

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BMO Mid Provincial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, BMO Mid is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Generation Mining and BMO Mid

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

The idea behind Generation Mining and BMO Mid Provincial 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.