Correlation Between BMO SP and Invesco SP
Can any of the company-specific risk be diversified away by investing in both BMO SP and Invesco SP 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 Invesco SP 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 Invesco SP 500, you can compare the effects of market volatilities on BMO SP and Invesco SP 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 Invesco SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO SP and Invesco SP.
Diversification Opportunities for BMO SP and Invesco SP
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between BMO and Invesco is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding BMO SP 500 and Invesco SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP 500 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 Invesco SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco SP 500 has no effect on the direction of BMO SP i.e., BMO SP and Invesco SP go up and down completely randomly.
Pair Corralation between BMO SP and Invesco SP
Assuming the 90 days trading horizon BMO SP is expected to generate 2.89 times less return on investment than Invesco SP. But when comparing it to its historical volatility, BMO SP 500 is 2.67 times less risky than Invesco SP. It trades about 0.18 of its potential returns per unit of risk. Invesco SP 500 is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 2,650 in Invesco SP 500 on August 27, 2024 and sell it today you would earn a total of 260.00 from holding Invesco SP 500 or generate 9.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
BMO SP 500 vs. Invesco SP 500
Performance |
| Timeline |
| BMO SP 500 |
| Invesco SP 500 |
BMO SP and Invesco SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO SP and Invesco SP
The main advantage of trading using opposite BMO SP and Invesco SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO SP position performs unexpectedly, Invesco SP 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 Invesco SP will offset losses from the drop in Invesco SP'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 |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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