Correlation Between GM and BMO Growth

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

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

Diversification Opportunities for GM and BMO Growth

0.76

Correlation Coefficient

GM  BMO Growth

Poor diversification

The 3 months correlation between GM and BMO is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding General Motors 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 GM 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 General Motors 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 GM i.e., GM and BMO Growth go up and down completely randomly.

Pair Corralation between GM and BMO Growth

Allowing for the 90-day total investment horizon General Motors is expected to generate 6.04 times more return on investment than BMO Growth. However, GM is 6.04 times more volatile than BMO Growth ETF. It trades about 0.1 of its potential returns per unit of risk. BMO Growth ETF is currently generating about 0.3 per unit of risk. If you would invest  4,602  in General Motors on September 12, 2024 and sell it today you would earn a total of  672.00  from holding General Motors or generate 14.6% return on investment over 90 days.

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

General Motors  vs.  BMO Growth ETF

General Motors

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.

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 GM and BMO Growth

The main advantage of trading using opposite GM and BMO Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM 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 General Motors 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.