Correlation Between BMO SPTSX and Invesco FTSE
Can any of the company-specific risk be diversified away by investing in both BMO SPTSX and Invesco FTSE 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 Invesco FTSE 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 Invesco FTSE RAFI, you can compare the effects of market volatilities on BMO SPTSX and Invesco FTSE 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 Invesco FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO SPTSX and Invesco FTSE.
Diversification Opportunities for BMO SPTSX and Invesco FTSE
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between BMO and Invesco is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding BMO SPTSX Capped and Invesco FTSE RAFI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco FTSE RAFI 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 Invesco FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco FTSE RAFI has no effect on the direction of BMO SPTSX i.e., BMO SPTSX and Invesco FTSE go up and down completely randomly.
Pair Corralation between BMO SPTSX and Invesco FTSE
Assuming the 90 days trading horizon BMO SPTSX Capped is expected to generate 0.83 times more return on investment than Invesco FTSE. However, BMO SPTSX Capped is 1.21 times less risky than Invesco FTSE. It trades about 0.29 of its potential returns per unit of risk. Invesco FTSE RAFI is currently generating about 0.2 per unit of risk. If you would invest 3,288 in BMO SPTSX Capped on August 29, 2024 and sell it today you would earn a total of 118.00 from holding BMO SPTSX Capped or generate 3.59% 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. Invesco FTSE RAFI
Performance |
| Timeline |
| BMO SPTSX Capped |
| Invesco FTSE RAFI |
BMO SPTSX and Invesco FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO SPTSX and Invesco FTSE
The main advantage of trading using opposite BMO SPTSX and Invesco FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO SPTSX position performs unexpectedly, Invesco FTSE 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 Invesco FTSE will offset losses from the drop in Invesco FTSE'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 |
| Invesco FTSE vs. Invesco 1 5 Year | Invesco FTSE vs. Invesco SPTSX Composite | Invesco FTSE vs. Invesco FTSE RAFI | Invesco FTSE vs. First Asset Morningstar |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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