Correlation Between BMO SP and Franklin Large
Can any of the company-specific risk be diversified away by investing in both BMO SP and Franklin Large 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 SP and Franklin Large into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO SP 500 and Franklin Large Cap, you can compare the effects of market volatilities on BMO SP and Franklin Large 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 SP with a short position of Franklin Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO SP and Franklin Large.
Diversification Opportunities for BMO SP and Franklin Large
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between BMO and Franklin is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding BMO SP 500 and Franklin Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Large Cap and BMO SP 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 SP 500 are associated (or correlated) with Franklin Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Large Cap has no effect on the direction of BMO SP i.e., BMO SP and Franklin Large go up and down completely randomly.
Pair Corralation between BMO SP and Franklin Large
Assuming the 90 days trading horizon BMO SP 500 is expected to generate 0.93 times more return on investment than Franklin Large. However, BMO SP 500 is 1.07 times less risky than Franklin Large. It trades about 0.18 of its potential returns per unit of risk. Franklin Large Cap is currently generating about 0.16 per unit of risk. If you would invest 7,120 in BMO SP 500 on August 29, 2024 and sell it today you would earn a total of 2,144 from holding BMO SP 500 or generate 30.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO SP 500 vs. Franklin Large Cap
Performance |
| Timeline |
| BMO SP 500 |
| Franklin Large Cap |
BMO SP and Franklin Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO SP and Franklin Large
The main advantage of trading using opposite BMO SP and Franklin Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO SP position performs unexpectedly, Franklin Large 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 Franklin Large will offset losses from the drop in Franklin Large's long position.| BMO SP vs. BMO SPTSX Capped | BMO SP vs. BMO NASDAQ 100 | BMO SP vs. iShares Core SP | BMO SP vs. Vanguard SP 500 |
| Franklin Large vs. Franklin Bissett Corporate | Franklin Large vs. FT AlphaDEX Industrials | Franklin Large vs. Dynamic Active Dividend |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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