Correlation Between BMO SP and CI Lawrence

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

By analyzing existing cross correlation between BMO SP 500 and CI Lawrence Park, you can compare the effects of market volatilities on BMO SP and CI Lawrence 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 BMO SP with a short position of CI Lawrence. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO SP and CI Lawrence.

Diversification Opportunities for BMO SP and CI Lawrence

0.89

Correlation Coefficient

BMO SP  CI Lawrence

Very poor diversification

The 3 months correlation between BMO and CRED is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding BMO SP 500 and CI Lawrence Park in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CI Lawrence Park and BMO SP 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 BMO SP 500 are associated (or correlated) with CI Lawrence. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CI Lawrence Park has no effect on the direction of BMO SP i.e., BMO SP and CI Lawrence go up and down completely randomly.

Pair Corralation between BMO SP and CI Lawrence

Assuming the 90 days trading horizon BMO SP 500 is expected to generate 4.88 times more return on investment than CI Lawrence. However, BMO SP is 4.88 times more volatile than CI Lawrence Park. It trades about 0.28 of its potential returns per unit of risk. CI Lawrence Park is currently generating about 0.26 per unit of risk. If you would invest  8,362  in BMO SP 500 on September 17, 2024 and sell it today you would earn a total of  1,115  from holding BMO SP 500 or generate 13.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.46%
Values	Daily Returns

BMO SP 500  vs.  CI Lawrence Park

BMO SP 500

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BMO SP 500 are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, BMO SP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

CI Lawrence Park

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CI Lawrence Park are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, CI Lawrence is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with BMO SP and CI Lawrence

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

The idea behind BMO SP 500 and CI Lawrence Park 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.

Check out your portfolio center.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.