Correlation Between BMO SPTSX and IShares Canadian
Can any of the company-specific risk be diversified away by investing in both BMO SPTSX and IShares 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 IShares 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 iShares Canadian Universe, you can compare the effects of market volatilities on BMO SPTSX and IShares 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 IShares Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO SPTSX and IShares Canadian.
Diversification Opportunities for BMO SPTSX and IShares Canadian
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between BMO and IShares is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding BMO SPTSX Equal and iShares Canadian Universe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Canadian Universe 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 IShares Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Canadian Universe has no effect on the direction of BMO SPTSX i.e., BMO SPTSX and IShares Canadian go up and down completely randomly.
Pair Corralation between BMO SPTSX and IShares Canadian
Assuming the 90 days trading horizon BMO SPTSX Equal is expected to under-perform the IShares Canadian. In addition to that, BMO SPTSX is 1.54 times more volatile than iShares Canadian Universe. It trades about -0.21 of its total potential returns per unit of risk. iShares Canadian Universe is currently generating about 0.1 per unit of volatility. If you would invest 2,838 in iShares Canadian Universe on November 27, 2024 and sell it today you would earn a total of 21.00 from holding iShares Canadian Universe or generate 0.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO SPTSX Equal vs. iShares Canadian Universe
Performance |
| Timeline |
| BMO SPTSX Equal |
| iShares Canadian Universe |
BMO SPTSX and IShares Canadian Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO SPTSX and IShares Canadian
The main advantage of trading using opposite BMO SPTSX and IShares Canadian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO SPTSX position performs unexpectedly, IShares 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 IShares Canadian will offset losses from the drop in IShares 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 |
| IShares Canadian vs. iShares Canadian Short | IShares Canadian vs. iShares MSCI EAFE | IShares Canadian vs. iShares Core Canadian | IShares Canadian vs. iShares Canadian Real |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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