Correlation Between Manulife Multifactor and BMO SPTSX
Can any of the company-specific risk be diversified away by investing in both Manulife Multifactor 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 Manulife Multifactor and BMO SPTSX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Manulife Multifactor Canadian and BMO SPTSX Capped, you can compare the effects of market volatilities on Manulife Multifactor 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 Manulife Multifactor with a short position of BMO SPTSX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Manulife Multifactor and BMO SPTSX.
Diversification Opportunities for Manulife Multifactor and BMO SPTSX
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Manulife and BMO is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Manulife Multifactor Canadian and BMO SPTSX Capped in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO SPTSX Capped and Manulife Multifactor 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 Manulife Multifactor Canadian 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 Capped has no effect on the direction of Manulife Multifactor i.e., Manulife Multifactor and BMO SPTSX go up and down completely randomly.
Pair Corralation between Manulife Multifactor and BMO SPTSX
Assuming the 90 days trading horizon Manulife Multifactor is expected to generate 2.84 times less return on investment than BMO SPTSX. In addition to that, Manulife Multifactor is 1.19 times more volatile than BMO SPTSX Capped. It trades about 0.05 of its total potential returns per unit of risk. BMO SPTSX Capped is currently generating about 0.18 per unit of volatility. If you would invest 3,303 in BMO SPTSX Capped on October 22, 2024 and sell it today you would earn a total of 64.00 from holding BMO SPTSX Capped or generate 1.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Manulife Multifactor Canadian vs. BMO SPTSX Capped
Performance |
| Timeline |
| Manulife Multifactor |
| BMO SPTSX Capped |
Manulife Multifactor and BMO SPTSX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Manulife Multifactor and BMO SPTSX
The main advantage of trading using opposite Manulife Multifactor and BMO SPTSX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Manulife Multifactor 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 Manulife Multifactor Canadian and BMO SPTSX Capped 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. BMO SP 500 | BMO SPTSX vs. Vanguard FTSE Canada | BMO SPTSX vs. Global X SPTSX | BMO SPTSX vs. iShares Core SP |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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