Correlation Between IShares SPTSX and BMO Equal
Can any of the company-specific risk be diversified away by investing in both IShares SPTSX and BMO Equal 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 Equal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares SPTSX 60 and BMO Equal Weight, you can compare the effects of market volatilities on IShares SPTSX and BMO Equal 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 Equal. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SPTSX and BMO Equal.
Diversification Opportunities for IShares SPTSX and BMO Equal
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and BMO is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding iShares SPTSX 60 and BMO Equal Weight in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Equal Weight 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 60 are associated (or correlated) with BMO Equal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Equal Weight has no effect on the direction of IShares SPTSX i.e., IShares SPTSX and BMO Equal go up and down completely randomly.
Pair Corralation between IShares SPTSX and BMO Equal
Assuming the 90 days trading horizon IShares SPTSX is expected to generate 1.23 times less return on investment than BMO Equal. But when comparing it to its historical volatility, iShares SPTSX 60 is 1.48 times less risky than BMO Equal. It trades about 0.12 of its potential returns per unit of risk. BMO Equal Weight is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 5,583 in BMO Equal Weight on August 28, 2024 and sell it today you would earn a total of 2,168 from holding BMO Equal Weight or generate 38.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares SPTSX 60 vs. BMO Equal Weight
Performance |
| Timeline |
| iShares SPTSX 60 |
| BMO Equal Weight |
IShares SPTSX and BMO Equal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares SPTSX and BMO Equal
The main advantage of trading using opposite IShares SPTSX and BMO Equal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares SPTSX position performs unexpectedly, BMO Equal 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 Equal will offset losses from the drop in BMO Equal's long position.| IShares SPTSX vs. iShares Core SP | IShares SPTSX vs. iShares Core SPTSX | IShares SPTSX vs. iShares SPTSX Capped | IShares SPTSX vs. iShares SPTSX Capped |
| BMO Equal vs. iShares SPTSX Capped | BMO Equal vs. BMO Equal Weight | BMO Equal vs. BMO SPTSX Equal | BMO Equal vs. BMO Equal Weight |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
Other Complementary Tools
| Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities |