Correlation Between BMO SPTSX and BMO MSCI
Can any of the company-specific risk be diversified away by investing in both BMO SPTSX and BMO MSCI 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 BMO MSCI 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 BMO MSCI Canada, you can compare the effects of market volatilities on BMO SPTSX and BMO MSCI 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 BMO MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO SPTSX and BMO MSCI.
Diversification Opportunities for BMO SPTSX and BMO MSCI
Almost no diversification
The 3 months correlation between BMO and BMO is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding BMO SPTSX Equal and BMO MSCI Canada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO MSCI Canada 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 BMO MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO MSCI Canada has no effect on the direction of BMO SPTSX i.e., BMO SPTSX and BMO MSCI go up and down completely randomly.
Pair Corralation between BMO SPTSX and BMO MSCI
Assuming the 90 days trading horizon BMO SPTSX Equal is expected to generate 1.44 times more return on investment than BMO MSCI. However, BMO SPTSX is 1.44 times more volatile than BMO MSCI Canada. It trades about 0.29 of its potential returns per unit of risk. BMO MSCI Canada is currently generating about 0.3 per unit of risk. If you would invest 4,177 in BMO SPTSX Equal on September 5, 2024 and sell it today you would earn a total of 243.00 from holding BMO SPTSX Equal or generate 5.82% 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. BMO MSCI Canada
Performance |
| Timeline |
| BMO SPTSX Equal |
| BMO MSCI Canada |
BMO SPTSX and BMO MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO SPTSX and BMO MSCI
The main advantage of trading using opposite BMO SPTSX and BMO MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO SPTSX position performs unexpectedly, BMO MSCI 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 BMO MSCI will offset losses from the drop in BMO MSCI's long position.| BMO SPTSX vs. BMO Equal Weight | BMO SPTSX vs. BMO Equal Weight | BMO SPTSX vs. BMO Global Infrastructure | BMO SPTSX vs. BMO SPTSX Equal |
| BMO MSCI vs. Mackenzie Large Cap | BMO MSCI vs. Goldman Sachs ActiveBeta | BMO MSCI vs. BMO MSCI EAFE | BMO MSCI vs. BMO Long Federal |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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