Correlation Between IShares Gold and BMO SPTSX
Can any of the company-specific risk be diversified away by investing in both IShares Gold and BMO SPTSX 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 IShares Gold and BMO SPTSX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Gold Bullion and BMO SPTSX Equal, you can compare the effects of market volatilities on IShares Gold and BMO SPTSX 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 IShares Gold with a short position of BMO SPTSX. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Gold and BMO SPTSX.
Diversification Opportunities for IShares Gold and BMO SPTSX
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and BMO is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding iShares Gold Bullion and BMO SPTSX Equal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO SPTSX Equal and IShares Gold 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 iShares Gold Bullion are associated (or correlated) with BMO SPTSX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO SPTSX Equal has no effect on the direction of IShares Gold i.e., IShares Gold and BMO SPTSX go up and down completely randomly.
Pair Corralation between IShares Gold and BMO SPTSX
Assuming the 90 days trading horizon iShares Gold Bullion is expected to under-perform the BMO SPTSX. But the etf apears to be less risky and, when comparing its historical volatility, iShares Gold Bullion is 1.3 times less risky than BMO SPTSX. The etf trades about -0.16 of its potential returns per unit of risk. The BMO SPTSX Equal is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 7,140 in BMO SPTSX Equal on August 30, 2024 and sell it today you would earn a total of 133.00 from holding BMO SPTSX Equal or generate 1.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Gold Bullion vs. BMO SPTSX Equal
Performance |
| Timeline |
| iShares Gold Bullion |
| BMO SPTSX Equal |
IShares Gold and BMO SPTSX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Gold and BMO SPTSX
The main advantage of trading using opposite IShares Gold and BMO SPTSX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Gold position performs unexpectedly, BMO SPTSX 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 SPTSX will offset losses from the drop in BMO SPTSX's long position.The idea behind iShares Gold Bullion and BMO SPTSX Equal 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.| BMO SPTSX vs. iShares SPTSX Capped | BMO SPTSX vs. BMO Aggregate Bond | BMO SPTSX vs. iShares Canadian HYBrid | BMO SPTSX vs. Brompton European Dividend |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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