Correlation Between BetaPro SP and BMO Discount
Can any of the company-specific risk be diversified away by investing in both BetaPro SP and BMO Discount 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 BetaPro SP and BMO Discount into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BetaPro SP 500 and BMO Discount Bond, you can compare the effects of market volatilities on BetaPro SP and BMO Discount 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 BetaPro SP with a short position of BMO Discount. Check out your portfolio center. Please also check ongoing floating volatility patterns of BetaPro SP and BMO Discount.
Diversification Opportunities for BetaPro SP and BMO Discount
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between BetaPro and BMO is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding BetaPro SP 500 and BMO Discount Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Discount Bond and BetaPro 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 BetaPro SP 500 are associated (or correlated) with BMO Discount. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Discount Bond has no effect on the direction of BetaPro SP i.e., BetaPro SP and BMO Discount go up and down completely randomly.
Pair Corralation between BetaPro SP and BMO Discount
Assuming the 90 days trading horizon BetaPro SP 500 is expected to under-perform the BMO Discount. In addition to that, BetaPro SP is 2.49 times more volatile than BMO Discount Bond. It trades about -0.14 of its total potential returns per unit of risk. BMO Discount Bond is currently generating about 0.15 per unit of volatility. If you would invest 1,509 in BMO Discount Bond on November 3, 2024 and sell it today you would earn a total of 17.00 from holding BMO Discount Bond or generate 1.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BetaPro SP 500 vs. BMO Discount Bond
Performance |
| Timeline |
| BetaPro SP 500 |
| BMO Discount Bond |
BetaPro SP and BMO Discount Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BetaPro SP and BMO Discount
The main advantage of trading using opposite BetaPro SP and BMO Discount positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BetaPro SP position performs unexpectedly, BMO Discount 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 Discount will offset losses from the drop in BMO Discount's long position.| BetaPro SP vs. BetaPro SPTSX 60 | BetaPro SP vs. BetaPro NASDAQ 100 2x | BetaPro SP vs. BetaPro SP 500 | BetaPro SP vs. BetaPro Gold Bullion |
| BMO Discount vs. Vanguard Canadian Short | BMO Discount vs. BMO Aggregate Bond | BMO Discount vs. BMO Short Corporate | BMO Discount vs. CI 1 5 Year |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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