Correlation Between BMO SPTSX and CI Lawrence
Can any of the company-specific risk be diversified away by investing in both BMO SPTSX and CI Lawrence 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 CI Lawrence into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO SPTSX Equal and CI Lawrence Park, you can compare the effects of market volatilities on BMO SPTSX and CI Lawrence 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 CI Lawrence. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO SPTSX and CI Lawrence.
Diversification Opportunities for BMO SPTSX and CI Lawrence
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between BMO and CRED is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding BMO SPTSX Equal and CI Lawrence Park in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CI Lawrence Park 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 Equal are associated (or correlated) with CI Lawrence. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CI Lawrence Park has no effect on the direction of BMO SPTSX i.e., BMO SPTSX and CI Lawrence go up and down completely randomly.
Pair Corralation between BMO SPTSX and CI Lawrence
Assuming the 90 days trading horizon BMO SPTSX Equal is expected to generate 4.61 times more return on investment than CI Lawrence. However, BMO SPTSX is 4.61 times more volatile than CI Lawrence Park. It trades about 0.09 of its potential returns per unit of risk. CI Lawrence Park is currently generating about 0.17 per unit of risk. If you would invest 3,109 in BMO SPTSX Equal on September 3, 2024 and sell it today you would earn a total of 1,168 from holding BMO SPTSX Equal or generate 37.57% 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 Equal vs. CI Lawrence Park
Performance |
| Timeline |
| BMO SPTSX Equal |
| CI Lawrence Park |
BMO SPTSX and CI Lawrence Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO SPTSX and CI Lawrence
The main advantage of trading using opposite BMO SPTSX and CI Lawrence positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO SPTSX position performs unexpectedly, CI Lawrence 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 CI Lawrence will offset losses from the drop in CI Lawrence's long position.| BMO SPTSX vs. BMO Covered Call | BMO SPTSX vs. BMO Canadian Dividend | BMO SPTSX vs. BMO Covered Call | BMO SPTSX vs. BMO Canadian High |
| CI Lawrence vs. CI Marret Alternative | CI Lawrence vs. CI Munro Alternative | CI Lawrence vs. CI Enhanced Short | CI Lawrence vs. CI Yield Enhanced |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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