Correlation Between BMO SPTSX and Fidelity Canadian
Can any of the company-specific risk be diversified away by investing in both BMO SPTSX and Fidelity 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 Fidelity 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 Fidelity Canadian Value, you can compare the effects of market volatilities on BMO SPTSX and Fidelity 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 Fidelity Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO SPTSX and Fidelity Canadian.
Diversification Opportunities for BMO SPTSX and Fidelity Canadian
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between BMO and Fidelity is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding BMO SPTSX Capped and Fidelity Canadian Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Canadian Value 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 Fidelity Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Canadian Value has no effect on the direction of BMO SPTSX i.e., BMO SPTSX and Fidelity Canadian go up and down completely randomly.
Pair Corralation between BMO SPTSX and Fidelity Canadian
Assuming the 90 days trading horizon BMO SPTSX Capped is expected to generate 0.99 times more return on investment than Fidelity Canadian. However, BMO SPTSX Capped is 1.01 times less risky than Fidelity Canadian. It trades about 0.19 of its potential returns per unit of risk. Fidelity Canadian Value is currently generating about 0.16 per unit of risk. If you would invest 2,943 in BMO SPTSX Capped on August 29, 2024 and sell it today you would earn a total of 474.00 from holding BMO SPTSX Capped or generate 16.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO SPTSX Capped vs. Fidelity Canadian Value
Performance |
| Timeline |
| BMO SPTSX Capped |
| Fidelity Canadian Value |
BMO SPTSX and Fidelity Canadian Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO SPTSX and Fidelity Canadian
The main advantage of trading using opposite BMO SPTSX and Fidelity Canadian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO SPTSX position performs unexpectedly, Fidelity 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 Fidelity Canadian will offset losses from the drop in Fidelity Canadian's long position.| BMO SPTSX vs. BMO SP 500 | BMO SPTSX vs. Vanguard FTSE Canada | BMO SPTSX vs. Global X SPTSX | BMO SPTSX vs. iShares Core SP |
| Fidelity Canadian vs. iShares SPTSX 60 | Fidelity Canadian vs. iShares Core SPTSX | Fidelity Canadian vs. BMO SPTSX Capped | Fidelity Canadian vs. Vanguard FTSE Canada |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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