Correlation Between BMO SP and Manulife Multifactor
Can any of the company-specific risk be diversified away by investing in both BMO SP and Manulife Multifactor 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 Manulife Multifactor 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 Manulife Multifactor Mid, you can compare the effects of market volatilities on BMO SP and Manulife Multifactor 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 Manulife Multifactor. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO SP and Manulife Multifactor.
Diversification Opportunities for BMO SP and Manulife Multifactor
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between BMO and Manulife is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding BMO SP 500 and Manulife Multifactor Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manulife Multifactor Mid 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 Manulife Multifactor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Manulife Multifactor Mid has no effect on the direction of BMO SP i.e., BMO SP and Manulife Multifactor go up and down completely randomly.
Pair Corralation between BMO SP and Manulife Multifactor
Assuming the 90 days trading horizon BMO SP is expected to generate 1.09 times less return on investment than Manulife Multifactor. But when comparing it to its historical volatility, BMO SP 500 is 1.3 times less risky than Manulife Multifactor. It trades about 0.18 of its potential returns per unit of risk. Manulife Multifactor Mid is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 4,099 in Manulife Multifactor Mid on September 2, 2024 and sell it today you would earn a total of 1,425 from holding Manulife Multifactor Mid or generate 34.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 87.9% |
| Values | Daily Returns |
BMO SP 500 vs. Manulife Multifactor Mid
Performance |
| Timeline |
| BMO SP 500 |
| Manulife Multifactor Mid |
BMO SP and Manulife Multifactor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO SP and Manulife Multifactor
The main advantage of trading using opposite BMO SP and Manulife Multifactor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO SP position performs unexpectedly, Manulife Multifactor 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 Manulife Multifactor will offset losses from the drop in Manulife Multifactor'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 |
| Manulife Multifactor vs. Brompton Global Dividend | Manulife Multifactor vs. Global Healthcare Income | Manulife Multifactor vs. Tech Leaders Income | Manulife Multifactor vs. Brompton North American |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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