Correlation Between BMO Global and CI Canada

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

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

Diversification Opportunities for BMO Global and CI Canada

0.58

Correlation Coefficient

BMO Global  CI Canada

Very weak diversification

The 3 months correlation between BMO and FLI is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding BMO Global High and CI Canada Lifeco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CI Canada Lifeco and BMO Global 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 Global High are associated (or correlated) with CI Canada. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CI Canada Lifeco has no effect on the direction of BMO Global i.e., BMO Global and CI Canada go up and down completely randomly.

Pair Corralation between BMO Global and CI Canada

Assuming the 90 days trading horizon BMO Global is expected to generate 8.2 times less return on investment than CI Canada. But when comparing it to its historical volatility, BMO Global High is 1.7 times less risky than CI Canada. It trades about 0.02 of its potential returns per unit of risk. CI Canada Lifeco is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,094  in CI Canada Lifeco on December 27, 2024 and sell it today you would earn a total of  79.00  from holding CI Canada Lifeco or generate 7.22% return on investment over 90 days.

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

BMO Global High  vs.  CI Canada Lifeco

BMO Global High

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BMO Global High are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, BMO Global is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

CI Canada Lifeco

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CI Canada Lifeco are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, CI Canada may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with BMO Global and CI Canada

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

The idea behind BMO Global High and CI Canada Lifeco 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.