Correlation Between IShares Core and BMO SPTSX
Can any of the company-specific risk be diversified away by investing in both IShares Core and BMO SPTSX 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 Core and BMO SPTSX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Core SP and BMO SPTSX Capped, you can compare the effects of market volatilities on IShares Core and BMO SPTSX 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 Core with a short position of BMO SPTSX. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and BMO SPTSX.
Diversification Opportunities for IShares Core and BMO SPTSX
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and BMO is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and BMO SPTSX Capped in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO SPTSX Capped and IShares Core 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 Core SP are associated (or correlated) with BMO SPTSX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO SPTSX Capped has no effect on the direction of IShares Core i.e., IShares Core and BMO SPTSX go up and down completely randomly.
Pair Corralation between IShares Core and BMO SPTSX
Assuming the 90 days trading horizon IShares Core is expected to generate 1.28 times less return on investment than BMO SPTSX. In addition to that, IShares Core is 1.58 times more volatile than BMO SPTSX Capped. It trades about 0.15 of its total potential returns per unit of risk. BMO SPTSX Capped is currently generating about 0.3 per unit of volatility. If you would invest 3,288 in BMO SPTSX Capped on August 28, 2024 and sell it today you would earn a total of 120.00 from holding BMO SPTSX Capped or generate 3.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Core SP vs. BMO SPTSX Capped
Performance |
| Timeline |
| iShares Core SP |
| BMO SPTSX Capped |
IShares Core and BMO SPTSX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Core and BMO SPTSX
The main advantage of trading using opposite IShares Core and BMO SPTSX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core position performs unexpectedly, BMO SPTSX 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 SPTSX will offset losses from the drop in BMO SPTSX's long position.| IShares Core vs. iShares SPTSX 60 | IShares Core vs. iShares MSCI EAFE | IShares Core vs. iShares Core SPTSX | IShares Core vs. iShares SPTSX Capped |
| BMO SPTSX vs. iShares SPTSX 60 | BMO SPTSX vs. iShares Core SP | BMO SPTSX vs. iShares SPTSX Composite | BMO SPTSX vs. iShares Core MSCI |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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