Correlation Between BMO Canadian and CI Galaxy

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

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

Diversification Opportunities for BMO Canadian and CI Galaxy

0.87

Correlation Coefficient

BMO Canadian  CI Galaxy

Very poor diversification

The 3 months correlation between BMO and CBCX is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding BMO Canadian Bank and CI Galaxy Blockchain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CI Galaxy Blockchain and BMO Canadian 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 BMO Canadian Bank are associated (or correlated) with CI Galaxy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CI Galaxy Blockchain has no effect on the direction of BMO Canadian i.e., BMO Canadian and CI Galaxy go up and down completely randomly.

Pair Corralation between BMO Canadian and CI Galaxy

Assuming the 90 days trading horizon BMO Canadian is expected to generate 25.5 times less return on investment than CI Galaxy. But when comparing it to its historical volatility, BMO Canadian Bank is 24.99 times less risky than CI Galaxy. It trades about 0.21 of its potential returns per unit of risk. CI Galaxy Blockchain is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  2,271  in CI Galaxy Blockchain on September 3, 2024 and sell it today you would earn a total of  1,726  from holding CI Galaxy Blockchain or generate 76.0% return on investment over 90 days.

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

BMO Canadian Bank  vs.  CI Galaxy Blockchain

BMO Canadian Bank

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BMO Canadian Bank are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, BMO Canadian is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

CI Galaxy Blockchain

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CI Galaxy Blockchain are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, CI Galaxy displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BMO Canadian and CI Galaxy

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

The idea behind BMO Canadian Bank and CI Galaxy Blockchain 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.