Correlation Between BMO SPTSX and BMO Real
Can any of the company-specific risk be diversified away by investing in both BMO SPTSX and BMO Real 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 BMO Real 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 BMO Real Return, you can compare the effects of market volatilities on BMO SPTSX and BMO Real 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 BMO Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO SPTSX and BMO Real.
Diversification Opportunities for BMO SPTSX and BMO Real
Excellent diversification
The 3 months correlation between BMO and BMO is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding BMO SPTSX Capped and BMO Real Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Real Return 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 BMO Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Real Return has no effect on the direction of BMO SPTSX i.e., BMO SPTSX and BMO Real go up and down completely randomly.
Pair Corralation between BMO SPTSX and BMO Real
Assuming the 90 days trading horizon BMO SPTSX Capped is expected to generate 1.2 times more return on investment than BMO Real. However, BMO SPTSX is 1.2 times more volatile than BMO Real Return. It trades about 0.3 of its potential returns per unit of risk. BMO Real Return is currently generating about -0.08 per unit of risk. If you would invest 3,286 in BMO SPTSX Capped on August 25, 2024 and sell it today you would earn a total of 125.00 from holding BMO SPTSX Capped or generate 3.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO SPTSX Capped vs. BMO Real Return
Performance |
| Timeline |
| BMO SPTSX Capped |
| BMO Real Return |
BMO SPTSX and BMO Real Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO SPTSX and BMO Real
The main advantage of trading using opposite BMO SPTSX and BMO Real positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO SPTSX position performs unexpectedly, BMO Real 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 BMO Real will offset losses from the drop in BMO Real'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 |
| BMO Real vs. BMO Long Corporate | BMO Real vs. BMO Short Provincial | BMO Real vs. BMO Short Federal | BMO Real vs. BMO Emerging Markets |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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