Correlation Between Badger Capital and BMO Global

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

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

Diversification Opportunities for Badger Capital and BMO Global

0.27

Correlation Coefficient

Badger Capital  BMO Global

Modest diversification

The 3 months correlation between Badger and BMO is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Badger Capital Corp 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 Badger Capital 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 Badger Capital Corp 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 Badger Capital i.e., Badger Capital and BMO Global go up and down completely randomly.

Pair Corralation between Badger Capital and BMO Global

Assuming the 90 days trading horizon Badger Capital Corp is expected to generate 6.19 times more return on investment than BMO Global. However, Badger Capital is 6.19 times more volatile than BMO Global Communications. It trades about 0.02 of its potential returns per unit of risk. BMO Global Communications is currently generating about 0.09 per unit of risk. If you would invest  10.00  in Badger Capital Corp on March 8, 2024 and sell it today you would lose (1.50) from holding Badger Capital Corp or give up 15.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Badger Capital Corp  vs.  BMO Global Communications

Badger Capital Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Badger Capital Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Badger Capital is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

BMO Global Communications

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BMO Global Communications are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, BMO Global is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Badger Capital and BMO Global

The main advantage of trading using opposite Badger Capital and BMO Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Badger Capital 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 Badger Capital Corp 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.