Correlation Between BMO Long and International Zeolite

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

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

Diversification Opportunities for BMO Long and International Zeolite

-0.32

Correlation Coefficient

BMO Long  International Zeolite

Very good diversification

The 3 months correlation between BMO and International is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding BMO Long Corporate and International Zeolite Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Zeolite and BMO Long 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 Long Corporate are associated (or correlated) with International Zeolite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Zeolite has no effect on the direction of BMO Long i.e., BMO Long and International Zeolite go up and down completely randomly.

Pair Corralation between BMO Long and International Zeolite

Assuming the 90 days trading horizon BMO Long Corporate is expected to generate 0.04 times more return on investment than International Zeolite. However, BMO Long Corporate is 22.32 times less risky than International Zeolite. It trades about 0.01 of its potential returns per unit of risk. International Zeolite Corp is currently generating about -0.05 per unit of risk. If you would invest  1,573  in BMO Long Corporate on December 1, 2024 and sell it today you would earn a total of  5.00  from holding BMO Long Corporate or generate 0.32% return on investment over 90 days.

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

BMO Long Corporate  vs.  International Zeolite Corp

BMO Long Corporate

Risk-Adjusted Performance

Very Weak

Over the last 90 days BMO Long Corporate has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

International Zeolite

Risk-Adjusted Performance

Very Weak

Over the last 90 days International Zeolite Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with BMO Long and International Zeolite

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

The idea behind BMO Long Corporate and International Zeolite Corp 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.