Correlation Between BMO Laddered and IShares SPTSX
Can any of the company-specific risk be diversified away by investing in both BMO Laddered 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 Laddered 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 Laddered Preferred and iShares SPTSX North, you can compare the effects of market volatilities on BMO Laddered 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 Laddered with a short position of IShares SPTSX. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Laddered and IShares SPTSX.
Diversification Opportunities for BMO Laddered and IShares SPTSX
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between BMO and IShares is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding BMO Laddered Preferred and iShares SPTSX North in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SPTSX North and BMO Laddered 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 Laddered Preferred 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 North has no effect on the direction of BMO Laddered i.e., BMO Laddered and IShares SPTSX go up and down completely randomly.
Pair Corralation between BMO Laddered and IShares SPTSX
Assuming the 90 days trading horizon BMO Laddered Preferred is expected to generate 0.95 times more return on investment than IShares SPTSX. However, BMO Laddered Preferred is 1.05 times less risky than IShares SPTSX. It trades about 0.16 of its potential returns per unit of risk. iShares SPTSX North is currently generating about 0.03 per unit of risk. If you would invest 1,037 in BMO Laddered Preferred on September 12, 2024 and sell it today you would earn a total of 40.00 from holding BMO Laddered Preferred or generate 3.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Laddered Preferred vs. iShares SPTSX North
Performance |
| Timeline |
| BMO Laddered Preferred |
| iShares SPTSX North |
BMO Laddered and IShares SPTSX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Laddered and IShares SPTSX
The main advantage of trading using opposite BMO Laddered and IShares SPTSX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Laddered 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 Laddered vs. iShares SPTSX Canadian | BMO Laddered vs. Global X Active | BMO Laddered vs. BMO Europe High | BMO Laddered vs. BMO Equal Weight |
| IShares SPTSX vs. iShares IG Corporate | IShares SPTSX vs. iShares Canadian HYBrid | IShares SPTSX vs. iShares JP Morgan | IShares SPTSX vs. iShares Floating Rate |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
Other Complementary Tools
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences |