Correlation Between European Residential and BMO SPTSX
Can any of the company-specific risk be diversified away by investing in both European Residential 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 European Residential and BMO SPTSX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between European Residential Real and BMO SPTSX Equal, you can compare the effects of market volatilities on European Residential 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 European Residential with a short position of BMO SPTSX. Check out your portfolio center. Please also check ongoing floating volatility patterns of European Residential and BMO SPTSX.
Diversification Opportunities for European Residential and BMO SPTSX
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between European and BMO is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding European Residential Real 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 European Residential 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 European Residential Real 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 European Residential i.e., European Residential and BMO SPTSX go up and down completely randomly.
Pair Corralation between European Residential and BMO SPTSX
Assuming the 90 days trading horizon European Residential Real is expected to generate 3.08 times more return on investment than BMO SPTSX. However, European Residential is 3.08 times more volatile than BMO SPTSX Equal. It trades about 0.17 of its potential returns per unit of risk. BMO SPTSX Equal is currently generating about 0.25 per unit of risk. If you would invest 293.00 in European Residential Real on September 12, 2024 and sell it today you would earn a total of 79.00 from holding European Residential Real or generate 26.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
European Residential Real vs. BMO SPTSX Equal
Performance |
| Timeline |
| European Residential Real |
| BMO SPTSX Equal |
European Residential and BMO SPTSX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with European Residential and BMO SPTSX
The main advantage of trading using opposite European Residential and BMO SPTSX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if European Residential 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.| European Residential vs. BSR Real Estate | European Residential vs. Minto Apartment Real | European Residential vs. Nexus Real Estate | European Residential vs. Morguard North American |
| BMO SPTSX vs. First Trust AlphaDEX | BMO SPTSX vs. FT AlphaDEX Industrials | BMO SPTSX vs. First Trust Senior |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
Other Complementary Tools
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. |