Correlation Between Forstrong Global and BMO Growth

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

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

Diversification Opportunities for Forstrong Global and BMO Growth

0.75

Correlation Coefficient

Forstrong Global  BMO Growth

Poor diversification

The 3 months correlation between Forstrong and BMO is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Forstrong Global Income and BMO Growth ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Growth ETF and Forstrong 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 Forstrong Global Income are associated (or correlated) with BMO Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Growth ETF has no effect on the direction of Forstrong Global i.e., Forstrong Global and BMO Growth go up and down completely randomly.

Pair Corralation between Forstrong Global and BMO Growth

Assuming the 90 days trading horizon Forstrong Global Income is expected to under-perform the BMO Growth. But the etf apears to be less risky and, when comparing its historical volatility, Forstrong Global Income is 1.14 times less risky than BMO Growth. The etf trades about -0.08 of its potential returns per unit of risk. The BMO Growth ETF is currently generating about 0.45 of returns per unit of risk over similar time horizon. If you would invest  4,479  in BMO Growth ETF on September 2, 2024 and sell it today you would earn a total of  186.00  from holding BMO Growth ETF or generate 4.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Forstrong Global Income  vs.  BMO Growth ETF

Forstrong Global Income

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Forstrong Global Income are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Forstrong Global is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

BMO Growth ETF

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BMO Growth ETF are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, BMO Growth may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Forstrong Global and BMO Growth

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

The idea behind Forstrong Global Income and BMO Growth ETF 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.