Correlation Between CI First and BMO SPTSX

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

By analyzing existing cross correlation between CI First Asset and BMO SPTSX Equal, you can compare the effects of market volatilities on CI First and BMO SPTSX 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 CI First with a short position of BMO SPTSX. Check out your portfolio center. Please also check ongoing floating volatility patterns of CI First and BMO SPTSX.

Diversification Opportunities for CI First and BMO SPTSX

0.48

Correlation Coefficient

CI First  BMO SPTSX

Very weak diversification

The 3 months correlation between MXF and BMO is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding CI First Asset and BMO SPTSX Equal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO SPTSX Equal and CI First 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 CI First Asset are associated (or correlated) with BMO SPTSX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO SPTSX Equal has no effect on the direction of CI First i.e., CI First and BMO SPTSX go up and down completely randomly.

Pair Corralation between CI First and BMO SPTSX

Assuming the 90 days trading horizon CI First is expected to generate 2.96 times less return on investment than BMO SPTSX. In addition to that, CI First is 1.03 times more volatile than BMO SPTSX Equal. It trades about 0.05 of its total potential returns per unit of risk. BMO SPTSX Equal is currently generating about 0.16 per unit of volatility. If you would invest  6,173  in BMO SPTSX Equal on September 3, 2024 and sell it today you would earn a total of  1,104  from holding BMO SPTSX Equal or generate 17.88% return on investment over 90 days.

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

CI First Asset  vs.  BMO SPTSX Equal

CI First Asset

Risk-Adjusted Performance

4 of 100

Insignificant

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

BMO SPTSX Equal

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BMO SPTSX Equal are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, BMO SPTSX displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CI First and BMO SPTSX

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

The idea behind CI First Asset and BMO SPTSX Equal 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.

Check out your portfolio center.

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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.