Correlation Between International Zeolite and BMO Long

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

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

Diversification Opportunities for International Zeolite and BMO Long

-0.37

Correlation Coefficient

International Zeolite  BMO Long

Very good diversification

The 3 months correlation between International and BMO is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding International Zeolite Corp and BMO Long Corporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Long Corporate and International Zeolite 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 International Zeolite Corp are associated (or correlated) with BMO Long. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Long Corporate has no effect on the direction of International Zeolite i.e., International Zeolite and BMO Long go up and down completely randomly.

Pair Corralation between International Zeolite and BMO Long

Given the investment horizon of 90 days International Zeolite Corp is expected to generate 19.16 times more return on investment than BMO Long. However, International Zeolite is 19.16 times more volatile than BMO Long Corporate. It trades about 0.03 of its potential returns per unit of risk. BMO Long Corporate is currently generating about 0.13 per unit of risk. If you would invest  3.00  in International Zeolite Corp on September 4, 2024 and sell it today you would lose (0.50) from holding International Zeolite Corp or give up 16.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

International Zeolite Corp  vs.  BMO Long Corporate

International Zeolite

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in International Zeolite Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, International Zeolite showed solid returns over the last few months and may actually be approaching a breakup point.

BMO Long Corporate

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BMO Long Corporate are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, BMO Long is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with International Zeolite and BMO Long

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

The idea behind International Zeolite Corp and BMO Long Corporate 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.