Correlation Between BMO Covered and CI Canada
Can any of the company-specific risk be diversified away by investing in both BMO Covered and CI Canada 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 Covered and CI Canada into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Covered Call and CI Canada Lifeco, you can compare the effects of market volatilities on BMO Covered and CI Canada 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 Covered with a short position of CI Canada. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Covered and CI Canada.
Diversification Opportunities for BMO Covered and CI Canada
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between BMO and FLI is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding BMO Covered Call and CI Canada Lifeco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CI Canada Lifeco and BMO Covered 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 Covered Call are associated (or correlated) with CI Canada. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CI Canada Lifeco has no effect on the direction of BMO Covered i.e., BMO Covered and CI Canada go up and down completely randomly.
Pair Corralation between BMO Covered and CI Canada
Assuming the 90 days trading horizon BMO Covered is expected to generate 6.08 times less return on investment than CI Canada. But when comparing it to its historical volatility, BMO Covered Call is 2.69 times less risky than CI Canada. It trades about 0.13 of its potential returns per unit of risk. CI Canada Lifeco is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 1,100 in CI Canada Lifeco on September 1, 2024 and sell it today you would earn a total of 99.00 from holding CI Canada Lifeco or generate 9.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
BMO Covered Call vs. CI Canada Lifeco
Performance |
| Timeline |
| BMO Covered Call |
| CI Canada Lifeco |
BMO Covered and CI Canada Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Covered and CI Canada
The main advantage of trading using opposite BMO Covered and CI Canada positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Covered position performs unexpectedly, CI Canada 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 Canada will offset losses from the drop in CI Canada's long position.| BMO Covered vs. BMO Covered Call | BMO Covered vs. BMO Canadian High | BMO Covered vs. BMO Europe High | BMO Covered vs. Harvest Healthcare Leaders |
| CI Canada vs. First Asset Energy | CI Canada vs. CI Gold Giants | CI Canada vs. Harvest Equal Weight | CI Canada vs. First Asset Tech |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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