Correlation Between IShares SPTSX and BMO Canadian
Can any of the company-specific risk be diversified away by investing in both IShares SPTSX and BMO Canadian 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 IShares SPTSX and BMO Canadian into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares SPTSX Composite and BMO Canadian Dividend, you can compare the effects of market volatilities on IShares SPTSX and BMO Canadian 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 IShares SPTSX with a short position of BMO Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SPTSX and BMO Canadian.
Diversification Opportunities for IShares SPTSX and BMO Canadian
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and BMO is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding iShares SPTSX Composite and BMO Canadian Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Canadian Dividend and IShares SPTSX 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 iShares SPTSX Composite are associated (or correlated) with BMO Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Canadian Dividend has no effect on the direction of IShares SPTSX i.e., IShares SPTSX and BMO Canadian go up and down completely randomly.
Pair Corralation between IShares SPTSX and BMO Canadian
Assuming the 90 days trading horizon IShares SPTSX is expected to generate 1.05 times less return on investment than BMO Canadian. But when comparing it to its historical volatility, iShares SPTSX Composite is 1.01 times less risky than BMO Canadian. It trades about 0.21 of its potential returns per unit of risk. BMO Canadian Dividend is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 2,240 in BMO Canadian Dividend on August 25, 2024 and sell it today you would earn a total of 46.00 from holding BMO Canadian Dividend or generate 2.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares SPTSX Composite vs. BMO Canadian Dividend
Performance |
| Timeline |
| iShares SPTSX Composite |
| BMO Canadian Dividend |
IShares SPTSX and BMO Canadian Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares SPTSX and BMO Canadian
The main advantage of trading using opposite IShares SPTSX and BMO Canadian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares SPTSX position performs unexpectedly, BMO Canadian 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 Canadian will offset losses from the drop in BMO Canadian's long position.| IShares SPTSX vs. Vanguard FTSE Canadian | IShares SPTSX vs. BMO Canadian Dividend | IShares SPTSX vs. Vanguard FTSE Canadian | IShares SPTSX vs. iShares Core SPTSX |
| BMO Canadian vs. iShares SPTSX Composite | BMO Canadian vs. iShares SPTSX Canadian | BMO Canadian vs. iShares Canadian Select | BMO Canadian vs. Vanguard FTSE Canadian |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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