Correlation Between BMO SPTSX and IShares Canadian
Can any of the company-specific risk be diversified away by investing in both BMO SPTSX and IShares 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 IShares 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 iShares Canadian Value, you can compare the effects of market volatilities on BMO SPTSX and IShares 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 IShares Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO SPTSX and IShares Canadian.
Diversification Opportunities for BMO SPTSX and IShares Canadian
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between BMO and IShares is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding BMO SPTSX Capped and iShares Canadian Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares 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 IShares Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Canadian Value has no effect on the direction of BMO SPTSX i.e., BMO SPTSX and IShares Canadian go up and down completely randomly.
Pair Corralation between BMO SPTSX and IShares Canadian
Assuming the 90 days trading horizon BMO SPTSX Capped is expected to generate 0.99 times more return on investment than IShares Canadian. However, BMO SPTSX Capped is 1.01 times less risky than IShares Canadian. It trades about 0.19 of its potential returns per unit of risk. iShares Canadian Value is currently generating about 0.18 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. iShares Canadian Value
Performance |
| Timeline |
| BMO SPTSX Capped |
| iShares Canadian Value |
BMO SPTSX and IShares Canadian Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO SPTSX and IShares Canadian
The main advantage of trading using opposite BMO SPTSX and IShares Canadian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO SPTSX position performs unexpectedly, IShares 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 IShares Canadian will offset losses from the drop in IShares 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 |
| IShares Canadian vs. iShares Canadian Growth | IShares Canadian vs. iShares Canadian Government | IShares Canadian vs. iShares SPTSX Small | IShares Canadian vs. iShares SPTSX Completion |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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