Correlation Between BMO NASDAQ and CI Europe

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

By analyzing existing cross correlation between BMO NASDAQ 100 and CI Europe Hedged, you can compare the effects of market volatilities on BMO NASDAQ and CI Europe 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 NASDAQ with a short position of CI Europe. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO NASDAQ and CI Europe.

Diversification Opportunities for BMO NASDAQ and CI Europe

-0.33

Correlation Coefficient

BMO NASDAQ  CI Europe

Very good diversification

The 3 months correlation between BMO and EHE is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding BMO NASDAQ 100 and CI Europe Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CI Europe Hedged and BMO NASDAQ 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 NASDAQ 100 are associated (or correlated) with CI Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CI Europe Hedged has no effect on the direction of BMO NASDAQ i.e., BMO NASDAQ and CI Europe go up and down completely randomly.

Pair Corralation between BMO NASDAQ and CI Europe

Assuming the 90 days trading horizon BMO NASDAQ 100 is expected to under-perform the CI Europe. In addition to that, BMO NASDAQ is 1.68 times more volatile than CI Europe Hedged. It trades about -0.1 of its total potential returns per unit of risk. CI Europe Hedged is currently generating about 0.25 per unit of volatility. If you would invest  3,136  in CI Europe Hedged on December 27, 2024 and sell it today you would earn a total of  380.00  from holding CI Europe Hedged or generate 12.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

BMO NASDAQ 100  vs.  CI Europe Hedged

BMO NASDAQ 100

Risk-Adjusted Performance

Very Weak

Over the last 90 days BMO NASDAQ 100 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

CI Europe Hedged

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CI Europe Hedged are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, CI Europe may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with BMO NASDAQ and CI Europe

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

The idea behind BMO NASDAQ 100 and CI Europe Hedged 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.