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 Real, 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
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between BMO and IShares is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding BMO SPTSX Equal and iShares Canadian Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Canadian Real 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 Real 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 generate 2.13 times more return on investment than IShares Canadian. However, BMO SPTSX is 2.13 times more volatile than iShares Canadian Real. It trades about 0.05 of its potential returns per unit of risk. iShares Canadian Real is currently generating about 0.02 per unit of risk. If you would invest 5,469 in BMO SPTSX Equal on August 31, 2024 and sell it today you would earn a total of 1,808 from holding BMO SPTSX Equal or generate 33.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO SPTSX Equal vs. iShares Canadian Real
Performance |
| Timeline |
| BMO SPTSX Equal |
| iShares Canadian Real |
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. CI First Asset | BMO SPTSX vs. BMO Aggregate Bond | BMO SPTSX vs. iShares Canadian HYBrid | BMO SPTSX vs. Brompton European Dividend |
| IShares Canadian vs. iShares Canadian Short | IShares Canadian vs. iShares Canadian Government | IShares Canadian vs. iShares Core Canadian | IShares Canadian vs. iShares Core Canadian |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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