Correlation Between Guardian and BMO MSCI

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

By analyzing existing cross correlation between Guardian i3 Global and BMO MSCI All, you can compare the effects of market volatilities on Guardian and BMO MSCI 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 Guardian with a short position of BMO MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guardian and BMO MSCI.

Diversification Opportunities for Guardian and BMO MSCI

0.67

Correlation Coefficient

Guardian  BMO MSCI

Poor diversification

The 3 months correlation between Guardian and BMO is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Guardian i3 Global and BMO MSCI All in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO MSCI All and Guardian 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 Guardian i3 Global are associated (or correlated) with BMO MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO MSCI All has no effect on the direction of Guardian i.e., Guardian and BMO MSCI go up and down completely randomly.

Pair Corralation between Guardian and BMO MSCI

Assuming the 90 days trading horizon Guardian i3 Global is expected to under-perform the BMO MSCI. In addition to that, Guardian is 1.66 times more volatile than BMO MSCI All. It trades about -0.03 of its total potential returns per unit of risk. BMO MSCI All is currently generating about 0.05 per unit of volatility. If you would invest  7,118  in BMO MSCI All on December 2, 2024 and sell it today you would earn a total of  152.00  from holding BMO MSCI All or generate 2.14% return on investment over 90 days.

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

Guardian i3 Global  vs.  BMO MSCI All

Guardian i3 Global

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guardian i3 Global has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Guardian is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

BMO MSCI All

Risk-Adjusted Performance

Insignificant

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

Pair Trading with Guardian and BMO MSCI

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

The idea behind Guardian i3 Global and BMO MSCI All 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.