Correlation Between BMO ESG and IA Clarington

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

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

Diversification Opportunities for BMO ESG and IA Clarington

0.85

Correlation Coefficient

BMO ESG  IA Clarington

Very poor diversification

The 3 months correlation between BMO and ICPB is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding BMO ESG Corporate and IA Clarington Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IA Clarington Core and BMO ESG 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 ESG Corporate are associated (or correlated) with IA Clarington. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IA Clarington Core has no effect on the direction of BMO ESG i.e., BMO ESG and IA Clarington go up and down completely randomly.

Pair Corralation between BMO ESG and IA Clarington

Assuming the 90 days trading horizon BMO ESG is expected to generate 1.35 times less return on investment than IA Clarington. In addition to that, BMO ESG is 1.2 times more volatile than IA Clarington Core. It trades about 0.08 of its total potential returns per unit of risk. IA Clarington Core is currently generating about 0.12 per unit of volatility. If you would invest  921.00  in IA Clarington Core on April 24, 2025 and sell it today you would earn a total of  22.00  from holding IA Clarington Core or generate 2.39% return on investment over 90 days.

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

BMO ESG Corporate  vs.  IA Clarington Core

BMO ESG Corporate

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BMO ESG Corporate are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, BMO ESG is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

IA Clarington Core

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in IA Clarington Core are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, IA Clarington 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 ESG and IA Clarington

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

The idea behind BMO ESG Corporate and IA Clarington Core 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.