Correlation Between BMO Long and Wealthsimple Developed

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

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

Diversification Opportunities for BMO Long and Wealthsimple Developed

-0.5

Correlation Coefficient

BMO Long  Wealthsimple Developed

Very good diversification

The 3 months correlation between BMO and Wealthsimple is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding BMO Long Federal and Wealthsimple Developed Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wealthsimple Developed and BMO Long 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 Long Federal are associated (or correlated) with Wealthsimple Developed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wealthsimple Developed has no effect on the direction of BMO Long i.e., BMO Long and Wealthsimple Developed go up and down completely randomly.

Pair Corralation between BMO Long and Wealthsimple Developed

Assuming the 90 days trading horizon BMO Long Federal is expected to under-perform the Wealthsimple Developed. But the etf apears to be less risky and, when comparing its historical volatility, BMO Long Federal is 1.03 times less risky than Wealthsimple Developed. The etf trades about -0.1 of its potential returns per unit of risk. The Wealthsimple Developed Markets is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  2,958  in Wealthsimple Developed Markets on April 20, 2025 and sell it today you would earn a total of  280.00  from holding Wealthsimple Developed Markets or generate 9.47% return on investment over 90 days.

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

BMO Long Federal  vs.  Wealthsimple Developed Markets

BMO Long Federal

Risk-Adjusted Performance

Very Weak

Over the last 90 days BMO Long Federal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, BMO Long is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Wealthsimple Developed

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wealthsimple Developed Markets are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Wealthsimple Developed may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with BMO Long and Wealthsimple Developed

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

The idea behind BMO Long Federal and Wealthsimple Developed Markets 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.