Correlation Between BMO SPTSX and Picton Mahoney
Can any of the company-specific risk be diversified away by investing in both BMO SPTSX and Picton Mahoney 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 Picton Mahoney 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 Picton Mahoney Fortified, you can compare the effects of market volatilities on BMO SPTSX and Picton Mahoney 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 Picton Mahoney. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO SPTSX and Picton Mahoney.
Diversification Opportunities for BMO SPTSX and Picton Mahoney
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between BMO and Picton is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding BMO SPTSX Equal and Picton Mahoney Fortified in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Picton Mahoney Fortified 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 Picton Mahoney. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Picton Mahoney Fortified has no effect on the direction of BMO SPTSX i.e., BMO SPTSX and Picton Mahoney go up and down completely randomly.
Pair Corralation between BMO SPTSX and Picton Mahoney
Assuming the 90 days trading horizon BMO SPTSX is expected to generate 1.33 times less return on investment than Picton Mahoney. But when comparing it to its historical volatility, BMO SPTSX Equal is 3.44 times less risky than Picton Mahoney. It trades about 0.78 of its potential returns per unit of risk. Picton Mahoney Fortified is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 1,995 in Picton Mahoney Fortified on September 1, 2024 and sell it today you would earn a total of 148.00 from holding Picton Mahoney Fortified or generate 7.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
BMO SPTSX Equal vs. Picton Mahoney Fortified
Performance |
| Timeline |
| BMO SPTSX Equal |
| Picton Mahoney Fortified |
BMO SPTSX and Picton Mahoney Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO SPTSX and Picton Mahoney
The main advantage of trading using opposite BMO SPTSX and Picton Mahoney positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO SPTSX position performs unexpectedly, Picton Mahoney 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 Picton Mahoney will offset losses from the drop in Picton Mahoney'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 |
| Picton Mahoney vs. Brompton Global Dividend | Picton Mahoney vs. Global Healthcare Income | Picton Mahoney vs. Tech Leaders Income | Picton Mahoney vs. Brompton North American |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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