Correlation Between BMO SPTSX and Desjardins Canadian
Can any of the company-specific risk be diversified away by investing in both BMO SPTSX and Desjardins 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 Desjardins Canadian 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 Desjardins Canadian Universe, you can compare the effects of market volatilities on BMO SPTSX and Desjardins 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 Desjardins Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO SPTSX and Desjardins Canadian.
Diversification Opportunities for BMO SPTSX and Desjardins Canadian
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between BMO and Desjardins is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding BMO SPTSX Equal and Desjardins Canadian Universe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Desjardins Canadian 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 Desjardins Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Desjardins Canadian has no effect on the direction of BMO SPTSX i.e., BMO SPTSX and Desjardins Canadian go up and down completely randomly.
Pair Corralation between BMO SPTSX and Desjardins Canadian
Assuming the 90 days trading horizon BMO SPTSX Equal is expected to generate 1.23 times more return on investment than Desjardins Canadian. However, BMO SPTSX is 1.23 times more volatile than Desjardins Canadian Universe. It trades about 0.45 of its potential returns per unit of risk. Desjardins Canadian Universe is currently generating about 0.13 per unit of risk. If you would invest 4,099 in BMO SPTSX Equal on August 30, 2024 and sell it today you would earn a total of 169.00 from holding BMO SPTSX Equal or generate 4.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
BMO SPTSX Equal vs. Desjardins Canadian Universe
Performance |
| Timeline |
| BMO SPTSX Equal |
| Desjardins Canadian |
BMO SPTSX and Desjardins Canadian Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO SPTSX and Desjardins Canadian
The main advantage of trading using opposite BMO SPTSX and Desjardins Canadian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO SPTSX position performs unexpectedly, Desjardins 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 Desjardins Canadian will offset losses from the drop in Desjardins Canadian'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 |
| Desjardins Canadian vs. Desjardins Canadian Short | Desjardins Canadian vs. Desjardins Canadian Preferred | Desjardins Canadian vs. Desjardins 1 5 Year | Desjardins Canadian vs. Desjardins 1 5 Year |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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