Correlation Between First Asset and BMO Long

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

By analyzing existing cross correlation between First Asset Tech and BMO Long Corporate, you can compare the effects of market volatilities on First Asset and BMO Long 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 First Asset with a short position of BMO Long. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Asset and BMO Long.

Diversification Opportunities for First Asset and BMO Long

-0.4

Correlation Coefficient

First Asset  BMO Long

Very good diversification

The 3 months correlation between First and BMO is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding First Asset Tech and BMO Long Corporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Long Corporate and First Asset 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 First Asset Tech are associated (or correlated) with BMO Long. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Long Corporate has no effect on the direction of First Asset i.e., First Asset and BMO Long go up and down completely randomly.

Pair Corralation between First Asset and BMO Long

Assuming the 90 days trading horizon First Asset Tech is expected to generate 3.37 times more return on investment than BMO Long. However, First Asset is 3.37 times more volatile than BMO Long Corporate. It trades about 0.1 of its potential returns per unit of risk. BMO Long Corporate is currently generating about 0.17 per unit of risk. If you would invest  2,023  in First Asset Tech on June 30, 2024 and sell it today you would earn a total of  142.00  from holding First Asset Tech or generate 7.02% return on investment over 90 days.

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

First Asset Tech  vs.  BMO Long Corporate

First Asset Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Asset Tech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, First Asset is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

BMO Long Corporate

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BMO Long Corporate are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, BMO Long may actually be approaching a critical reversion point that can send shares even higher in October 2024.

Pair Trading with First Asset and BMO Long

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

The idea behind First Asset Tech and BMO Long Corporate 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.