Correlation Between Accelerate OneChoice and BMO Global

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

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

Diversification Opportunities for Accelerate OneChoice and BMO Global

0.94

Correlation Coefficient

Accelerate OneChoice  BMO Global

Almost no diversification

The 3 months correlation between Accelerate and BMO is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Accelerate OneChoice Alternati and BMO Global Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Global Communications and Accelerate OneChoice 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 Accelerate OneChoice Alternative are associated (or correlated) with BMO Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Global Communications has no effect on the direction of Accelerate OneChoice i.e., Accelerate OneChoice and BMO Global go up and down completely randomly.

Pair Corralation between Accelerate OneChoice and BMO Global

Assuming the 90 days trading horizon Accelerate OneChoice is expected to generate 3.01 times less return on investment than BMO Global. But when comparing it to its historical volatility, Accelerate OneChoice Alternative is 1.45 times less risky than BMO Global. It trades about 0.09 of its potential returns per unit of risk. BMO Global Communications is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  2,203  in BMO Global Communications on September 14, 2024 and sell it today you would earn a total of  1,998  from holding BMO Global Communications or generate 90.69% return on investment over 90 days.

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

Accelerate OneChoice Alternati  vs.  BMO Global Communications

Accelerate OneChoice

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Accelerate OneChoice Alternative are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Accelerate OneChoice is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

BMO Global Communications

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in BMO Global Communications are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, BMO Global displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Accelerate OneChoice and BMO Global

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

The idea behind Accelerate OneChoice Alternative and BMO Global Communications 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.