Correlation Between BMO NASDAQ and BMO SPTSX
Can any of the company-specific risk be diversified away by investing in both BMO NASDAQ and BMO 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 NASDAQ and BMO SPTSX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO NASDAQ 100 and BMO SPTSX Equal, you can compare the effects of market volatilities on BMO NASDAQ and BMO 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 NASDAQ with a short position of BMO SPTSX. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO NASDAQ and BMO SPTSX.
Diversification Opportunities for BMO NASDAQ and BMO SPTSX
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between BMO and BMO is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding BMO NASDAQ 100 and BMO SPTSX Equal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO SPTSX Equal and BMO NASDAQ 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 NASDAQ 100 are associated (or correlated) with BMO SPTSX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO SPTSX Equal has no effect on the direction of BMO NASDAQ i.e., BMO NASDAQ and BMO SPTSX go up and down completely randomly.
Pair Corralation between BMO NASDAQ and BMO SPTSX
Assuming the 90 days trading horizon BMO NASDAQ is expected to generate 1.28 times less return on investment than BMO SPTSX. In addition to that, BMO NASDAQ is 2.76 times more volatile than BMO SPTSX Equal. It trades about 0.11 of its total potential returns per unit of risk. BMO SPTSX Equal is currently generating about 0.39 per unit of volatility. If you would invest 4,117 in BMO SPTSX Equal on August 29, 2024 and sell it today you would earn a total of 149.00 from holding BMO SPTSX Equal or generate 3.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO NASDAQ 100 vs. BMO SPTSX Equal
Performance |
| Timeline |
| BMO NASDAQ 100 |
| BMO SPTSX Equal |
BMO NASDAQ and BMO SPTSX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO NASDAQ and BMO SPTSX
The main advantage of trading using opposite BMO NASDAQ and BMO SPTSX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO NASDAQ position performs unexpectedly, BMO 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 BMO SPTSX will offset losses from the drop in BMO SPTSX's long position.| BMO NASDAQ vs. BMO SP 500 | BMO NASDAQ vs. iShares NASDAQ 100 | BMO NASDAQ vs. BMO SPTSX Equal | BMO NASDAQ vs. iShares SPTSX Capped |
| BMO SPTSX vs. BMO Covered Call | BMO SPTSX vs. BMO Canadian Dividend | BMO SPTSX vs. BMO Covered Call | BMO SPTSX vs. BMO Canadian High |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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