Correlation Between Fidelity Advantage and BMO ESG

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

By analyzing existing cross correlation between Fidelity Advantage Ether and BMO ESG Corporate, you can compare the effects of market volatilities on Fidelity Advantage and BMO ESG 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 Fidelity Advantage with a short position of BMO ESG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Advantage and BMO ESG.

Diversification Opportunities for Fidelity Advantage and BMO ESG

0.73

Correlation Coefficient

Fidelity Advantage  BMO ESG

Poor diversification

The 3 months correlation between Fidelity and BMO is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Advantage Ether and BMO ESG Corporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO ESG Corporate and Fidelity Advantage 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 Fidelity Advantage Ether are associated (or correlated) with BMO ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO ESG Corporate has no effect on the direction of Fidelity Advantage i.e., Fidelity Advantage and BMO ESG go up and down completely randomly.

Pair Corralation between Fidelity Advantage and BMO ESG

Assuming the 90 days trading horizon Fidelity Advantage Ether is expected to generate 13.23 times more return on investment than BMO ESG. However, Fidelity Advantage is 13.23 times more volatile than BMO ESG Corporate. It trades about 0.24 of its potential returns per unit of risk. BMO ESG Corporate is currently generating about 0.08 per unit of risk. If you would invest  4,162  in Fidelity Advantage Ether on September 16, 2024 and sell it today you would earn a total of  3,340  from holding Fidelity Advantage Ether or generate 80.25% return on investment over 90 days.

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

Fidelity Advantage Ether  vs.  BMO ESG Corporate

Fidelity Advantage Ether

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Advantage Ether are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Fidelity Advantage displayed solid returns over the last few months and may actually be approaching a breakup point.

BMO ESG Corporate

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with Fidelity Advantage and BMO ESG

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

The idea behind Fidelity Advantage Ether and BMO ESG Corporate 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 Transaction History module to view history of all your transactions and understand their impact on performance.