Correlation Between BMO Equal and CI Global

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

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

Diversification Opportunities for BMO Equal and CI Global

0.44

Correlation Coefficient

BMO Equal  CI Global

Very weak diversification

The 3 months correlation between BMO and FSF is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding BMO Equal Weight and CI Global Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CI Global Financial and BMO Equal 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 Equal Weight are associated (or correlated) with CI Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CI Global Financial has no effect on the direction of BMO Equal i.e., BMO Equal and CI Global go up and down completely randomly.

Pair Corralation between BMO Equal and CI Global

Assuming the 90 days trading horizon BMO Equal Weight is expected to under-perform the CI Global. In addition to that, BMO Equal is 1.4 times more volatile than CI Global Financial. It trades about -0.05 of its total potential returns per unit of risk. CI Global Financial is currently generating about 0.08 per unit of volatility. If you would invest  3,042  in CI Global Financial on December 20, 2024 and sell it today you would earn a total of  154.00  from holding CI Global Financial or generate 5.06% return on investment over 90 days.

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

BMO Equal Weight  vs.  CI Global Financial

BMO Equal Weight

Risk-Adjusted Performance

Very Weak

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

CI Global Financial

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CI Global Financial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, CI Global is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with BMO Equal and CI Global

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

The idea behind BMO Equal Weight and CI Global Financial 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.