Correlation Between BMO SPTSX and IShares JP
Can any of the company-specific risk be diversified away by investing in both BMO SPTSX and IShares JP 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 JP 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 JP Morgan, you can compare the effects of market volatilities on BMO SPTSX and IShares JP 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 JP. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO SPTSX and IShares JP.
Diversification Opportunities for BMO SPTSX and IShares JP
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between BMO and IShares is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding BMO SPTSX Capped and iShares JP Morgan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares JP Morgan 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 JP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares JP Morgan has no effect on the direction of BMO SPTSX i.e., BMO SPTSX and IShares JP go up and down completely randomly.
Pair Corralation between BMO SPTSX and IShares JP
Assuming the 90 days trading horizon BMO SPTSX Capped is expected to generate 1.35 times more return on investment than IShares JP. However, BMO SPTSX is 1.35 times more volatile than iShares JP Morgan. It trades about 0.35 of its potential returns per unit of risk. iShares JP Morgan is currently generating about 0.23 per unit of risk. If you would invest 3,337 in BMO SPTSX Capped on September 13, 2024 and sell it today you would earn a total of 105.00 from holding BMO SPTSX Capped or generate 3.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO SPTSX Capped vs. iShares JP Morgan
Performance |
| Timeline |
| BMO SPTSX Capped |
| iShares JP Morgan |
BMO SPTSX and IShares JP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO SPTSX and IShares JP
The main advantage of trading using opposite BMO SPTSX and IShares JP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO SPTSX position performs unexpectedly, IShares JP 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 JP will offset losses from the drop in IShares JP'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 |
| IShares JP vs. iShares IG Corporate | IShares JP vs. iShares 1 10Yr Laddered | IShares JP vs. iShares Floating Rate | IShares JP vs. iShares Convertible Bond |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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