Correlation Between BetaPro SP and BMO Preferred
Can any of the company-specific risk be diversified away by investing in both BetaPro SP and BMO Preferred 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 Preferred 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 Preferred Share, you can compare the effects of market volatilities on BetaPro SP and BMO Preferred 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 Preferred. Check out your portfolio center. Please also check ongoing floating volatility patterns of BetaPro SP and BMO Preferred.
Diversification Opportunities for BetaPro SP and BMO Preferred
-0.8 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between BetaPro and BMO is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding BetaPro SP 500 and BMO Preferred Share in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Preferred Share 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 Preferred. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Preferred Share has no effect on the direction of BetaPro SP i.e., BetaPro SP and BMO Preferred go up and down completely randomly.
Pair Corralation between BetaPro SP and BMO Preferred
Assuming the 90 days trading horizon BetaPro SP 500 is expected to under-perform the BMO Preferred. In addition to that, BetaPro SP is 1.49 times more volatile than BMO Preferred Share. It trades about -0.15 of its total potential returns per unit of risk. BMO Preferred Share is currently generating about -0.05 per unit of volatility. If you would invest 2,216 in BMO Preferred Share on August 29, 2024 and sell it today you would lose (16.00) from holding BMO Preferred Share or give up 0.72% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BetaPro SP 500 vs. BMO Preferred Share
Performance |
| Timeline |
| BetaPro SP 500 |
| BMO Preferred Share |
BetaPro SP and BMO Preferred Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BetaPro SP and BMO Preferred
The main advantage of trading using opposite BetaPro SP and BMO Preferred positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BetaPro SP position performs unexpectedly, BMO Preferred 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 Preferred will offset losses from the drop in BMO Preferred'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 Preferred vs. BMO Preferred Share | BMO Preferred vs. BMO High Yield | BMO Preferred vs. BMO Put Write | BMO Preferred vs. BMO Laddered Preferred |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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