Correlation Between BMO SPTSX and CIBC Canadian

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Can any of the company-specific risk be diversified away by investing in both BMO SPTSX and CIBC 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 BMO SPTSX and CIBC Canadian into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO SPTSX Capped and CIBC Canadian Equity, you can compare the effects of market volatilities on BMO SPTSX and CIBC 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 BMO SPTSX with a short position of CIBC Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO SPTSX and CIBC Canadian.

Diversification Opportunities for BMO SPTSX and CIBC Canadian

1.0
  Correlation Coefficient

No risk reduction

The 3 months correlation between BMO and CIBC is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding BMO SPTSX Capped and CIBC Canadian Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CIBC Canadian Equity and BMO 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 BMO SPTSX Capped are associated (or correlated) with CIBC Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CIBC Canadian Equity has no effect on the direction of BMO SPTSX i.e., BMO SPTSX and CIBC Canadian go up and down completely randomly.

Pair Corralation between BMO SPTSX and CIBC Canadian

Assuming the 90 days trading horizon BMO SPTSX Capped is expected to generate 0.88 times more return on investment than CIBC Canadian. However, BMO SPTSX Capped is 1.14 times less risky than CIBC Canadian. It trades about 0.66 of its potential returns per unit of risk. CIBC Canadian Equity is currently generating about 0.58 per unit of risk. If you would invest  3,237  in BMO SPTSX Capped on September 1, 2024 and sell it today you would earn a total of  207.00  from holding BMO SPTSX Capped or generate 6.39% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy95.65%
ValuesDaily Returns

BMO SPTSX Capped  vs.  CIBC Canadian Equity

 Performance 
       Timeline  
BMO SPTSX Capped 

Risk-Adjusted Performance

29 of 100

 
Weak
 
Strong
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in BMO SPTSX Capped are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, BMO SPTSX may actually be approaching a critical reversion point that can send shares even higher in December 2024.
CIBC Canadian Equity 

Risk-Adjusted Performance

26 of 100

 
Weak
 
Strong
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in CIBC Canadian Equity are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, CIBC Canadian may actually be approaching a critical reversion point that can send shares even higher in December 2024.

BMO SPTSX and CIBC Canadian Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with BMO SPTSX and CIBC Canadian

The main advantage of trading using opposite BMO SPTSX and CIBC Canadian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO SPTSX position performs unexpectedly, CIBC 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 CIBC Canadian will offset losses from the drop in CIBC Canadian's long position.
The idea behind BMO SPTSX Capped and CIBC Canadian Equity pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.

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