Correlation Between BMO Mid and CI Yield

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

By analyzing existing cross correlation between BMO Mid Provincial and CI Yield Enhanced, you can compare the effects of market volatilities on BMO Mid and CI Yield 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 CI Yield. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Mid and CI Yield.

Diversification Opportunities for BMO Mid and CI Yield

0.83

Correlation Coefficient

BMO Mid  CI Yield

Very poor diversification

The 3 months correlation between BMO and CAGG is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding BMO Mid Provincial and CI Yield Enhanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CI Yield Enhanced 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 Provincial are associated (or correlated) with CI Yield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CI Yield Enhanced has no effect on the direction of BMO Mid i.e., BMO Mid and CI Yield go up and down completely randomly.

Pair Corralation between BMO Mid and CI Yield

Assuming the 90 days trading horizon BMO Mid is expected to generate 3.36 times less return on investment than CI Yield. In addition to that, BMO Mid is 1.0 times more volatile than CI Yield Enhanced. It trades about 0.05 of its total potential returns per unit of risk. CI Yield Enhanced is currently generating about 0.16 per unit of volatility. If you would invest  4,421  in CI Yield Enhanced on September 13, 2024 and sell it today you would earn a total of  108.00  from holding CI Yield Enhanced or generate 2.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	97.67%
Values	Daily Returns

BMO Mid Provincial  vs.  CI Yield Enhanced

BMO Mid Provincial

Risk-Adjusted Performance

0 of 100

Very Weak

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

CI Yield Enhanced

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CI Yield Enhanced are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, CI Yield is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with BMO Mid and CI Yield

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

The idea behind BMO Mid Provincial and CI Yield Enhanced 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.