Correlation Between BMO SPTSX and IShares Gold
Can any of the company-specific risk be diversified away by investing in both BMO SPTSX and IShares Gold 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 IShares Gold 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 iShares Gold Bullion, you can compare the effects of market volatilities on BMO SPTSX and IShares Gold 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 IShares Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO SPTSX and IShares Gold.
Diversification Opportunities for BMO SPTSX and IShares Gold
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between BMO and IShares is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding BMO SPTSX Capped and iShares Gold Bullion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Gold Bullion 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 IShares Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Gold Bullion has no effect on the direction of BMO SPTSX i.e., BMO SPTSX and IShares Gold go up and down completely randomly.
Pair Corralation between BMO SPTSX and IShares Gold
Assuming the 90 days trading horizon BMO SPTSX is expected to generate 1.11 times less return on investment than IShares Gold. But when comparing it to its historical volatility, BMO SPTSX Capped is 1.31 times less risky than IShares Gold. It trades about 0.17 of its potential returns per unit of risk. iShares Gold Bullion is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 2,350 in iShares Gold Bullion on August 24, 2024 and sell it today you would earn a total of 801.00 from holding iShares Gold Bullion or generate 34.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO SPTSX Capped vs. iShares Gold Bullion
Performance |
| Timeline |
| BMO SPTSX Capped |
| iShares Gold Bullion |
BMO SPTSX and IShares Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO SPTSX and IShares Gold
The main advantage of trading using opposite BMO SPTSX and IShares Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO SPTSX position performs unexpectedly, IShares Gold 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 IShares Gold will offset losses from the drop in IShares Gold's long position.| BMO SPTSX vs. iShares SPTSX 60 | BMO SPTSX vs. iShares Core SP | BMO SPTSX vs. iShares SPTSX Composite | BMO SPTSX vs. iShares Core MSCI |
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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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