Correlation Between BMO Clean and EcoSynthetix

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

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

Diversification Opportunities for BMO Clean and EcoSynthetix

-0.62

Correlation Coefficient

BMO Clean  EcoSynthetix

Excellent diversification

The 3 months correlation between BMO and EcoSynthetix is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding BMO Clean Energy and EcoSynthetix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EcoSynthetix and BMO Clean 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 Clean Energy are associated (or correlated) with EcoSynthetix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EcoSynthetix has no effect on the direction of BMO Clean i.e., BMO Clean and EcoSynthetix go up and down completely randomly.

Pair Corralation between BMO Clean and EcoSynthetix

Assuming the 90 days trading horizon BMO Clean Energy is expected to under-perform the EcoSynthetix. But the etf apears to be less risky and, when comparing its historical volatility, BMO Clean Energy is 1.99 times less risky than EcoSynthetix. The etf trades about -0.07 of its potential returns per unit of risk. The EcoSynthetix is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  397.00  in EcoSynthetix on December 5, 2024 and sell it today you would earn a total of  79.00  from holding EcoSynthetix or generate 19.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

BMO Clean Energy  vs.  EcoSynthetix

BMO Clean Energy

Risk-Adjusted Performance

Very Weak

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

EcoSynthetix

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EcoSynthetix are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, EcoSynthetix displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BMO Clean and EcoSynthetix

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

The idea behind BMO Clean Energy and EcoSynthetix 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.