Correlation Between BMO SP and Forstrong Global

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

By analyzing existing cross correlation between BMO SP 500 and Forstrong Global Income, you can compare the effects of market volatilities on BMO SP and Forstrong 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 BMO SP with a short position of Forstrong Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO SP and Forstrong Global.

Diversification Opportunities for BMO SP and Forstrong Global

0.91

Correlation Coefficient

BMO SP  Forstrong Global

Almost no diversification

The 3 months correlation between BMO and Forstrong is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding BMO SP 500 and Forstrong Global Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forstrong Global Income and BMO SP 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 SP 500 are associated (or correlated) with Forstrong Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forstrong Global Income has no effect on the direction of BMO SP i.e., BMO SP and Forstrong Global go up and down completely randomly.

Pair Corralation between BMO SP and Forstrong Global

Assuming the 90 days trading horizon BMO SP 500 is expected to generate 3.6 times more return on investment than Forstrong Global. However, BMO SP is 3.6 times more volatile than Forstrong Global Income. It trades about 0.24 of its potential returns per unit of risk. Forstrong Global Income is currently generating about 0.14 per unit of risk. If you would invest  8,293  in BMO SP 500 on April 24, 2025 and sell it today you would earn a total of  1,097  from holding BMO SP 500 or generate 13.23% return on investment over 90 days.

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

BMO SP 500  vs.  Forstrong Global Income

BMO SP 500

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BMO SP 500 are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, BMO SP displayed solid returns over the last few months and may actually be approaching a breakup point.

Forstrong Global Income

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Forstrong Global Income are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Forstrong Global 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 SP and Forstrong Global

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

The idea behind BMO SP 500 and Forstrong Global Income 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.