Correlation Between IShares SPTSX and BMO Global
Can any of the company-specific risk be diversified away by investing in both IShares SPTSX and BMO Global 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 Global 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 Global Consumer, you can compare the effects of market volatilities on IShares SPTSX and BMO Global 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 Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SPTSX and BMO Global.
Diversification Opportunities for IShares SPTSX and BMO Global
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between IShares and BMO is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding iShares SPTSX Capped and BMO Global Consumer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Global Consumer 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 Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Global Consumer has no effect on the direction of IShares SPTSX i.e., IShares SPTSX and BMO Global go up and down completely randomly.
Pair Corralation between IShares SPTSX and BMO Global
Assuming the 90 days trading horizon iShares SPTSX Capped is expected to generate 3.65 times more return on investment than BMO Global. However, IShares SPTSX is 3.65 times more volatile than BMO Global Consumer. It trades about 0.43 of its potential returns per unit of risk. BMO Global Consumer is currently generating about 0.07 per unit of risk. If you would invest 5,863 in iShares SPTSX Capped on September 5, 2024 and sell it today you would earn a total of 1,091 from holding iShares SPTSX Capped or generate 18.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares SPTSX Capped vs. BMO Global Consumer
Performance |
| Timeline |
| iShares SPTSX Capped |
| BMO Global Consumer |
IShares SPTSX and BMO Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares SPTSX and BMO Global
The main advantage of trading using opposite IShares SPTSX and BMO Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares SPTSX position performs unexpectedly, BMO Global 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 Global will offset losses from the drop in BMO Global's long position.| IShares SPTSX vs. International Zeolite Corp | IShares SPTSX vs. European Residential Real | IShares SPTSX vs. Financial 15 Split | IShares SPTSX vs. Rubicon Organics |
| BMO Global vs. International Zeolite Corp | BMO Global vs. European Residential Real | BMO Global vs. Financial 15 Split | BMO Global vs. Rubicon Organics |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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