Correlation Between BMO SPTSX and BMO Long
Can any of the company-specific risk be diversified away by investing in both BMO SPTSX and BMO Long 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 Long 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 Long Provincial, you can compare the effects of market volatilities on BMO SPTSX and BMO Long 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 Long. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO SPTSX and BMO Long.
Diversification Opportunities for BMO SPTSX and BMO Long
Excellent diversification
The 3 months correlation between BMO and BMO is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding BMO SPTSX Equal and BMO Long Provincial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Long Provincial 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 Long. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Long Provincial has no effect on the direction of BMO SPTSX i.e., BMO SPTSX and BMO Long go up and down completely randomly.
Pair Corralation between BMO SPTSX and BMO Long
Assuming the 90 days trading horizon BMO SPTSX Equal is expected to generate 2.25 times more return on investment than BMO Long. However, BMO SPTSX is 2.25 times more volatile than BMO Long Provincial. It trades about 0.07 of its potential returns per unit of risk. BMO Long Provincial is currently generating about 0.13 per unit of risk. If you would invest 7,079 in BMO SPTSX Equal on August 29, 2024 and sell it today you would earn a total of 172.00 from holding BMO SPTSX Equal or generate 2.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO SPTSX Equal vs. BMO Long Provincial
Performance |
| Timeline |
| BMO SPTSX Equal |
| BMO Long Provincial |
BMO SPTSX and BMO Long Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO SPTSX and BMO Long
The main advantage of trading using opposite BMO SPTSX and BMO Long positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO SPTSX position performs unexpectedly, BMO Long 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 Long will offset losses from the drop in BMO Long's long position.| BMO SPTSX vs. iShares SPTSX Capped | BMO SPTSX vs. BMO Aggregate Bond | BMO SPTSX vs. iShares Canadian HYBrid | BMO SPTSX vs. Brompton European Dividend |
| BMO Long vs. BMO Long Corporate | BMO Long vs. BMO Short Provincial | BMO Long vs. BMO Mid Provincial | BMO Long vs. BMO Mid Corporate |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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