Correlation Between CI Canada and BMO Premium

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

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

Diversification Opportunities for CI Canada and BMO Premium

0.92

Correlation Coefficient

CI Canada  BMO Premium

Almost no diversification

The 3 months correlation between FLI and BMO is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding CI Canada Lifeco and BMO Premium Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Premium Yield and CI Canada 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 CI Canada Lifeco are associated (or correlated) with BMO Premium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Premium Yield has no effect on the direction of CI Canada i.e., CI Canada and BMO Premium go up and down completely randomly.

Pair Corralation between CI Canada and BMO Premium

Assuming the 90 days trading horizon CI Canada Lifeco is expected to generate 2.49 times more return on investment than BMO Premium. However, CI Canada is 2.49 times more volatile than BMO Premium Yield. It trades about 0.19 of its potential returns per unit of risk. BMO Premium Yield is currently generating about 0.27 per unit of risk. If you would invest  1,036  in CI Canada Lifeco on September 6, 2024 and sell it today you would earn a total of  139.00  from holding CI Canada Lifeco or generate 13.42% return on investment over 90 days.

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

CI Canada Lifeco  vs.  BMO Premium Yield

CI Canada Lifeco

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CI Canada Lifeco are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, CI Canada displayed solid returns over the last few months and may actually be approaching a breakup point.

BMO Premium Yield

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BMO Premium Yield are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, BMO Premium may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with CI Canada and BMO Premium

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

The idea behind CI Canada Lifeco and BMO Premium Yield 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..