Correlation Between BMO Premium and IShares SPTSX
Can any of the company-specific risk be diversified away by investing in both BMO Premium 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 Premium 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 Premium Yield and iShares SPTSX 60, you can compare the effects of market volatilities on BMO Premium 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 Premium with a short position of IShares SPTSX. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Premium and IShares SPTSX.
Diversification Opportunities for BMO Premium and IShares SPTSX
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between BMO and IShares is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding BMO Premium Yield 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 Premium 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 Premium Yield 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 Premium i.e., BMO Premium and IShares SPTSX go up and down completely randomly.
Pair Corralation between BMO Premium and IShares SPTSX
Assuming the 90 days trading horizon BMO Premium Yield is expected to generate 0.69 times more return on investment than IShares SPTSX. However, BMO Premium Yield is 1.46 times less risky than IShares SPTSX. It trades about -0.01 of its potential returns per unit of risk. iShares SPTSX 60 is currently generating about -0.04 per unit of risk. If you would invest 3,340 in BMO Premium Yield on November 27, 2024 and sell it today you would lose (3.00) from holding BMO Premium Yield or give up 0.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Premium Yield vs. iShares SPTSX 60
Performance |
| Timeline |
| BMO Premium Yield |
| iShares SPTSX 60 |
BMO Premium and IShares SPTSX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Premium and IShares SPTSX
The main advantage of trading using opposite BMO Premium and IShares SPTSX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Premium 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 Premium vs. BMO Europe High | BMO Premium vs. BMO Tactical Dividend | BMO Premium vs. BMO Europe High | BMO Premium vs. BMO Global High |
| 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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