Correlation Between BMO Mid and Celestica

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

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

Diversification Opportunities for BMO Mid and Celestica

0.59

Correlation Coefficient

BMO Mid  Celestica

Very weak diversification

The 3 months correlation between BMO and Celestica is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding BMO Mid Term IG and Celestica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Celestica and BMO Mid 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 Mid Term IG are associated (or correlated) with Celestica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Celestica has no effect on the direction of BMO Mid i.e., BMO Mid and Celestica go up and down completely randomly.

Pair Corralation between BMO Mid and Celestica

Assuming the 90 days trading horizon BMO Mid is expected to generate 20.56 times less return on investment than Celestica. But when comparing it to its historical volatility, BMO Mid Term IG is 11.99 times less risky than Celestica. It trades about 0.17 of its potential returns per unit of risk. Celestica is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  6,296  in Celestica on September 2, 2024 and sell it today you would earn a total of  5,741  from holding Celestica or generate 91.18% return on investment over 90 days.

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

BMO Mid Term IG  vs.  Celestica

BMO Mid Term

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BMO Mid Term IG are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, BMO Mid is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Celestica

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Celestica are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Celestica displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BMO Mid and Celestica

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

The idea behind BMO Mid Term IG and Celestica 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.