Correlation Between Dow Jones and BMO SPTSX
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and BMO SPTSX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and BMO SPTSX Equal, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of BMO SPTSX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and BMO SPTSX.
Diversification Opportunities for Dow Jones and BMO SPTSX
Poor diversification
The 3 months correlation between Dow and BMO is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial 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 Dow Jones 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 Dow Jones Industrial 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 Dow Jones i.e., Dow Jones and BMO SPTSX go up and down completely randomly.
Pair Corralation between Dow Jones and BMO SPTSX
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.55 times more return on investment than BMO SPTSX. However, Dow Jones Industrial is 1.82 times less risky than BMO SPTSX. It trades about 0.27 of its potential returns per unit of risk. BMO SPTSX Equal is currently generating about 0.05 per unit of risk. If you would invest 4,223,305 in Dow Jones Industrial on August 30, 2024 and sell it today you would earn a total of 248,901 from holding Dow Jones Industrial or generate 5.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. BMO SPTSX Equal
Performance |
| Timeline |
Dow Jones and BMO SPTSX Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
BMO SPTSX Equal
Pair trading matchups for BMO SPTSX
Pair Trading with Dow Jones and BMO SPTSX
The main advantage of trading using opposite Dow Jones and BMO SPTSX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. Skillful Craftsman Education | Dow Jones vs. Acco Brands | Dow Jones vs. Cracker Barrel Old | Dow Jones vs. Coursera |
| BMO SPTSX vs. iShares SPTSX Global | BMO SPTSX vs. BMO Junior Gold | BMO SPTSX vs. BMO Equal Weight | BMO SPTSX vs. BMO Global Infrastructure |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
Other Complementary Tools
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites |