Correlation Between BMO SPTSX and Hamilton Canadian
Can any of the company-specific risk be diversified away by investing in both BMO SPTSX and Hamilton 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 Hamilton 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 Hamilton Canadian Bank, you can compare the effects of market volatilities on BMO SPTSX and Hamilton 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 Hamilton Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO SPTSX and Hamilton Canadian.
Diversification Opportunities for BMO SPTSX and Hamilton Canadian
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between BMO and Hamilton is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding BMO SPTSX Equal and Hamilton Canadian Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hamilton Canadian Bank 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 Hamilton Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hamilton Canadian Bank has no effect on the direction of BMO SPTSX i.e., BMO SPTSX and Hamilton Canadian go up and down completely randomly.
Pair Corralation between BMO SPTSX and Hamilton Canadian
Assuming the 90 days trading horizon BMO SPTSX Equal is expected to generate 0.86 times more return on investment than Hamilton Canadian. However, BMO SPTSX Equal is 1.17 times less risky than Hamilton Canadian. It trades about 0.36 of its potential returns per unit of risk. Hamilton Canadian Bank is currently generating about 0.23 per unit of risk. If you would invest 3,999 in BMO SPTSX Equal on August 25, 2024 and sell it today you would earn a total of 270.00 from holding BMO SPTSX Equal or generate 6.75% 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. Hamilton Canadian Bank
Performance |
| Timeline |
| BMO SPTSX Equal |
| Hamilton Canadian Bank |
BMO SPTSX and Hamilton Canadian Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO SPTSX and Hamilton Canadian
The main advantage of trading using opposite BMO SPTSX and Hamilton Canadian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO SPTSX position performs unexpectedly, Hamilton 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 Hamilton Canadian will offset losses from the drop in Hamilton Canadian's long position.| BMO SPTSX vs. Brompton Global Dividend | BMO SPTSX vs. Tech Leaders Income | BMO SPTSX vs. Global Healthcare Income | BMO SPTSX vs. Brompton European Dividend |
| Hamilton Canadian vs. Brompton Global Dividend | Hamilton Canadian vs. Tech Leaders Income | Hamilton Canadian vs. Global Healthcare Income | Hamilton Canadian vs. Brompton European Dividend |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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