Correlation Between BMO Balanced and IShares SPTSX
Can any of the company-specific risk be diversified away by investing in both BMO Balanced and IShares SPTSX 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 Balanced and IShares SPTSX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Balanced ESG and iShares SPTSX 60, you can compare the effects of market volatilities on BMO Balanced and IShares SPTSX 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 Balanced with a short position of IShares SPTSX. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Balanced and IShares SPTSX.
Diversification Opportunities for BMO Balanced and IShares SPTSX
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between BMO and IShares is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding BMO Balanced ESG and iShares SPTSX 60 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SPTSX 60 and BMO Balanced 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 Balanced ESG are associated (or correlated) with IShares SPTSX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SPTSX 60 has no effect on the direction of BMO Balanced i.e., BMO Balanced and IShares SPTSX go up and down completely randomly.
Pair Corralation between BMO Balanced and IShares SPTSX
Assuming the 90 days trading horizon BMO Balanced is expected to generate 1.74 times less return on investment than IShares SPTSX. But when comparing it to its historical volatility, BMO Balanced ESG is 1.23 times less risky than IShares SPTSX. It trades about 0.23 of its potential returns per unit of risk. iShares SPTSX 60 is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 3,698 in iShares SPTSX 60 on August 29, 2024 and sell it today you would earn a total of 156.00 from holding iShares SPTSX 60 or generate 4.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Balanced ESG vs. iShares SPTSX 60
Performance |
| Timeline |
| BMO Balanced ESG |
| iShares SPTSX 60 |
BMO Balanced and IShares SPTSX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Balanced and IShares SPTSX
The main advantage of trading using opposite BMO Balanced and IShares SPTSX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Balanced position performs unexpectedly, IShares SPTSX 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 SPTSX will offset losses from the drop in IShares SPTSX's long position.| BMO Balanced vs. iShares SPTSX 60 | BMO Balanced vs. iShares Core SP | BMO Balanced vs. iShares Core SPTSX | BMO Balanced vs. BMO Aggregate Bond |
| IShares SPTSX vs. iShares Core SP | IShares SPTSX vs. iShares Core SPTSX | IShares SPTSX vs. iShares SPTSX Capped | IShares SPTSX vs. iShares SPTSX Capped |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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