Correlation Between Ab Small and Bmo Large-cap

Can any of the company-specific risk be diversified away by investing in both Ab Small and Bmo Large-cap 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 Ab Small and Bmo Large-cap into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ab Small Cap and Bmo Large Cap Growth, you can compare the effects of market volatilities on Ab Small and Bmo Large-cap 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 Ab Small with a short position of Bmo Large-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab Small and Bmo Large-cap.

Diversification Opportunities for Ab Small and Bmo Large-cap

0.8

Correlation Coefficient

Ab Small  Bmo Large-cap

Very poor diversification

The 3 months correlation between SCAVX and Bmo is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Ab Small Cap and Bmo Large Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bmo Large Cap and Ab Small 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 Ab Small Cap are associated (or correlated) with Bmo Large-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bmo Large Cap has no effect on the direction of Ab Small i.e., Ab Small and Bmo Large-cap go up and down completely randomly.

Pair Corralation between Ab Small and Bmo Large-cap

Assuming the 90 days horizon Ab Small is expected to generate 1.28 times less return on investment than Bmo Large-cap. In addition to that, Ab Small is 1.43 times more volatile than Bmo Large Cap Growth. It trades about 0.12 of its total potential returns per unit of risk. Bmo Large Cap Growth is currently generating about 0.22 per unit of volatility. If you would invest  2,072  in Bmo Large Cap Growth on May 21, 2025 and sell it today you would earn a total of  235.00  from holding Bmo Large Cap Growth or generate 11.34% return on investment over 90 days.

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

Ab Small Cap  vs.  Bmo Large Cap Growth

Ab Small Cap

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Ab Small Cap are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Ab Small may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Bmo Large Cap

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bmo Large Cap Growth are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Bmo Large-cap may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Ab Small and Bmo Large-cap

The main advantage of trading using opposite Ab Small and Bmo Large-cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ab Small position performs unexpectedly, Bmo Large-cap 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 Large-cap will offset losses from the drop in Bmo Large-cap's long position.

The idea behind Ab Small Cap and Bmo Large Cap Growth 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.