Correlation Between Wealthsimple North and BMO SIA

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

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

Diversification Opportunities for Wealthsimple North and BMO SIA

0.86

Correlation Coefficient

Wealthsimple North  BMO SIA

Very poor diversification

The 3 months correlation between Wealthsimple and BMO is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Wealthsimple North America 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 Wealthsimple North 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 Wealthsimple North America 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 Wealthsimple North i.e., Wealthsimple North and BMO SIA go up and down completely randomly.

Pair Corralation between Wealthsimple North and BMO SIA

Assuming the 90 days trading horizon Wealthsimple North America is expected to generate 0.89 times more return on investment than BMO SIA. However, Wealthsimple North America is 1.12 times less risky than BMO SIA. It trades about 0.21 of its potential returns per unit of risk. BMO SIA Focused is currently generating about 0.18 per unit of risk. If you would invest  4,108  in Wealthsimple North America on April 21, 2025 and sell it today you would earn a total of  402.00  from holding Wealthsimple North America or generate 9.79% return on investment over 90 days.

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

Wealthsimple North America  vs.  BMO SIA Focused

Wealthsimple North

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wealthsimple North America are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Wealthsimple North may actually be approaching a critical reversion point that can send shares even higher in August 2025.

BMO SIA Focused

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BMO SIA Focused are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, BMO SIA may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Wealthsimple North and BMO SIA

The main advantage of trading using opposite Wealthsimple North and BMO SIA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wealthsimple North 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 Wealthsimple North America 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.

Check out your portfolio center.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.