Correlation Between BMO SPTSX and NBI High
Can any of the company-specific risk be diversified away by investing in both BMO SPTSX and NBI High 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 NBI High 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 NBI High Yield, you can compare the effects of market volatilities on BMO SPTSX and NBI High 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 NBI High. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO SPTSX and NBI High.
Diversification Opportunities for BMO SPTSX and NBI High
Poor diversification
The 3 months correlation between BMO and NBI is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding BMO SPTSX Capped and NBI High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NBI High Yield 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 NBI High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NBI High Yield has no effect on the direction of BMO SPTSX i.e., BMO SPTSX and NBI High go up and down completely randomly.
Pair Corralation between BMO SPTSX and NBI High
Assuming the 90 days trading horizon BMO SPTSX Capped is expected to generate 0.38 times more return on investment than NBI High. However, BMO SPTSX Capped is 2.66 times less risky than NBI High. It trades about 0.12 of its potential returns per unit of risk. NBI High Yield is currently generating about 0.03 per unit of risk. If you would invest 2,556 in BMO SPTSX Capped on August 31, 2024 and sell it today you would earn a total of 888.00 from holding BMO SPTSX Capped or generate 34.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 87.13% |
| Values | Daily Returns |
BMO SPTSX Capped vs. NBI High Yield
Performance |
| Timeline |
| BMO SPTSX Capped |
| NBI High Yield |
BMO SPTSX and NBI High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO SPTSX and NBI High
The main advantage of trading using opposite BMO SPTSX and NBI High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO SPTSX position performs unexpectedly, NBI High 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 NBI High will offset losses from the drop in NBI High's long position.| BMO SPTSX vs. iShares SPTSX 60 | BMO SPTSX vs. iShares Core SPTSX | BMO SPTSX vs. Vanguard FTSE Canada | BMO SPTSX vs. Global X SPTSX |
| NBI High vs. NBI Unconstrained Fixed | NBI High vs. NBI Active Canadian | NBI High vs. NBI Sustainable Canadian | NBI High vs. Picton Mahoney Fortified |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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