Correlation Between IShares SPTSX and BMO Junior
Can any of the company-specific risk be diversified away by investing in both IShares SPTSX and BMO Junior 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 Junior 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 Junior Gold, you can compare the effects of market volatilities on IShares SPTSX and BMO Junior 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 Junior. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SPTSX and BMO Junior.
Diversification Opportunities for IShares SPTSX and BMO Junior
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between IShares and BMO is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding iShares SPTSX Capped and BMO Junior Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Junior Gold 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 Junior. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Junior Gold has no effect on the direction of IShares SPTSX i.e., IShares SPTSX and BMO Junior go up and down completely randomly.
Pair Corralation between IShares SPTSX and BMO Junior
Assuming the 90 days trading horizon IShares SPTSX is expected to generate 1.83 times less return on investment than BMO Junior. But when comparing it to its historical volatility, iShares SPTSX Capped is 2.18 times less risky than BMO Junior. It trades about 0.09 of its potential returns per unit of risk. BMO Junior Gold is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 8,145 in BMO Junior Gold on September 1, 2024 and sell it today you would earn a total of 1,469 from holding BMO Junior Gold or generate 18.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares SPTSX Capped vs. BMO Junior Gold
Performance |
| Timeline |
| iShares SPTSX Capped |
| BMO Junior Gold |
IShares SPTSX and BMO Junior Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares SPTSX and BMO Junior
The main advantage of trading using opposite IShares SPTSX and BMO Junior positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares SPTSX position performs unexpectedly, BMO Junior 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 Junior will offset losses from the drop in BMO Junior's long position.| IShares SPTSX vs. iShares SPTSX Capped | IShares SPTSX vs. iShares Canadian Select | IShares SPTSX vs. iShares SPTSX Capped | IShares SPTSX 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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