Correlation Between BMO NASDAQ and CI Enhanced

Can any of the company-specific risk be diversified away by investing in both BMO NASDAQ and CI Enhanced 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 Enhanced 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 Enhanced Government, you can compare the effects of market volatilities on BMO NASDAQ and CI Enhanced 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 Enhanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO NASDAQ and CI Enhanced.

Diversification Opportunities for BMO NASDAQ and CI Enhanced

-0.6

Correlation Coefficient

BMO NASDAQ  CI Enhanced

Excellent diversification

The 3 months correlation between BMO and FGO is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding BMO NASDAQ 100 and CI Enhanced Government in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CI Enhanced Government 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 Enhanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CI Enhanced Government has no effect on the direction of BMO NASDAQ i.e., BMO NASDAQ and CI Enhanced go up and down completely randomly.

Pair Corralation between BMO NASDAQ and CI Enhanced

Assuming the 90 days trading horizon BMO NASDAQ 100 is expected to under-perform the CI Enhanced. In addition to that, BMO NASDAQ is 3.45 times more volatile than CI Enhanced Government. It trades about -0.08 of its total potential returns per unit of risk. CI Enhanced Government is currently generating about 0.09 per unit of volatility. If you would invest  984.00  in CI Enhanced Government on December 28, 2024 and sell it today you would earn a total of  20.00  from holding CI Enhanced Government or generate 2.03% return on investment over 90 days.

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

BMO NASDAQ 100  vs.  CI Enhanced Government

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 weak 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 Enhanced Government

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CI Enhanced Government are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, CI Enhanced 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 NASDAQ and CI Enhanced

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

The idea behind BMO NASDAQ 100 and CI Enhanced Government 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.