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 Capped and BMO Canadian High, 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
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and BMO is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding iShares SPTSX Capped and BMO Canadian High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Canadian High 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 Capped 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 High 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 Capped is expected to generate 1.32 times more return on investment than BMO Canadian. However, IShares SPTSX is 1.32 times more volatile than BMO Canadian High. It trades about 0.33 of its potential returns per unit of risk. BMO Canadian High is currently generating about 0.14 per unit of risk. If you would invest 5,746 in iShares SPTSX Capped on August 25, 2024 and sell it today you would earn a total of 283.00 from holding iShares SPTSX Capped or generate 4.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares SPTSX Capped vs. BMO Canadian High
Performance |
| Timeline |
| iShares SPTSX Capped |
| BMO Canadian High |
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. iShares SPTSX Capped | IShares SPTSX vs. iShares SPTSX Capped | IShares SPTSX vs. iShares SPTSX Global | IShares SPTSX vs. iShares SPTSX Capped |
| BMO Canadian vs. iShares Diversified Monthly | BMO Canadian vs. iShares SPTSX Capped | BMO Canadian vs. iShares SPTSX Capped |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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