Correlation Between BMO Laddered and Sustainable Power

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

By analyzing existing cross correlation between BMO Laddered Preferred and Sustainable Power Infrastructure, you can compare the effects of market volatilities on BMO Laddered and Sustainable Power 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 Laddered with a short position of Sustainable Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Laddered and Sustainable Power.

Diversification Opportunities for BMO Laddered and Sustainable Power

-0.54

Correlation Coefficient

BMO Laddered  Sustainable Power

Excellent diversification

The 3 months correlation between BMO and Sustainable is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding BMO Laddered Preferred and Sustainable Power Infrastructu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sustainable Power and BMO Laddered 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 Laddered Preferred are associated (or correlated) with Sustainable Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sustainable Power has no effect on the direction of BMO Laddered i.e., BMO Laddered and Sustainable Power go up and down completely randomly.

Pair Corralation between BMO Laddered and Sustainable Power

Assuming the 90 days trading horizon BMO Laddered Preferred is expected to generate 0.17 times more return on investment than Sustainable Power. However, BMO Laddered Preferred is 5.77 times less risky than Sustainable Power. It trades about -0.12 of its potential returns per unit of risk. Sustainable Power Infrastructure is currently generating about -0.51 per unit of risk. If you would invest  1,107  in BMO Laddered Preferred on December 11, 2024 and sell it today you would lose (9.00) from holding BMO Laddered Preferred or give up 0.81% of portfolio value over 90 days.

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

BMO Laddered Preferred  vs.  Sustainable Power Infrastructu

BMO Laddered Preferred

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BMO Laddered Preferred are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, BMO Laddered is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Sustainable Power

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sustainable Power Infrastructure has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with BMO Laddered and Sustainable Power

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

The idea behind BMO Laddered Preferred and Sustainable Power Infrastructure 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.