Correlation Between NBI Unconstrained and BMO Global

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

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

Diversification Opportunities for NBI Unconstrained and BMO Global

0.87

Correlation Coefficient

NBI Unconstrained  BMO Global

Very poor diversification

The 3 months correlation between NBI and BMO is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding NBI Unconstrained Fixed and BMO Global Strategic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Global Strategic and NBI Unconstrained 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 NBI Unconstrained Fixed 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 Strategic has no effect on the direction of NBI Unconstrained i.e., NBI Unconstrained and BMO Global go up and down completely randomly.

Pair Corralation between NBI Unconstrained and BMO Global

Assuming the 90 days trading horizon NBI Unconstrained Fixed is expected to generate 1.07 times more return on investment than BMO Global. However, NBI Unconstrained is 1.07 times more volatile than BMO Global Strategic. It trades about 0.14 of its potential returns per unit of risk. BMO Global Strategic is currently generating about 0.15 per unit of risk. If you would invest  2,063  in NBI Unconstrained Fixed on April 17, 2025 and sell it today you would earn a total of  63.00  from holding NBI Unconstrained Fixed or generate 3.05% return on investment over 90 days.

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

NBI Unconstrained Fixed  vs.  BMO Global Strategic

NBI Unconstrained Fixed

Risk-Adjusted Performance

Good

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

BMO Global Strategic

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BMO Global Strategic are ranked lower than 11 (%) 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 current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with NBI Unconstrained and BMO Global

The main advantage of trading using opposite NBI Unconstrained and BMO Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NBI Unconstrained 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 NBI Unconstrained Fixed and BMO Global Strategic 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.