Correlation Between Tech Leaders and BMO SIA

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

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

Diversification Opportunities for Tech Leaders and BMO SIA

0.9

Correlation Coefficient

Tech Leaders  BMO SIA

Almost no diversification

The 3 months correlation between Tech and BMO is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Tech Leaders Income and BMO SIA Focused in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO SIA Focused and Tech Leaders 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 Tech Leaders Income are associated (or correlated) with BMO SIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO SIA Focused has no effect on the direction of Tech Leaders i.e., Tech Leaders and BMO SIA go up and down completely randomly.

Pair Corralation between Tech Leaders and BMO SIA

Assuming the 90 days trading horizon Tech Leaders Income is expected to generate 1.23 times more return on investment than BMO SIA. However, Tech Leaders is 1.23 times more volatile than BMO SIA Focused. It trades about 0.33 of its potential returns per unit of risk. BMO SIA Focused is currently generating about 0.11 per unit of risk. If you would invest  2,136  in Tech Leaders Income on April 24, 2025 and sell it today you would earn a total of  457.00  from holding Tech Leaders Income or generate 21.4% return on investment over 90 days.

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

Tech Leaders Income  vs.  BMO SIA Focused

Tech Leaders Income

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Tech Leaders Income are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Tech Leaders displayed solid returns over the last few months and may actually be approaching a breakup point.

BMO SIA Focused

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BMO SIA Focused are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, BMO SIA is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Tech Leaders and BMO SIA

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

The idea behind Tech Leaders Income and BMO SIA Focused 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.