Correlation Between BMO SP and Invesco NASDAQ
Can any of the company-specific risk be diversified away by investing in both BMO SP and Invesco NASDAQ 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 NASDAQ 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 NASDAQ 100, you can compare the effects of market volatilities on BMO SP and Invesco NASDAQ 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 NASDAQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO SP and Invesco NASDAQ.
Diversification Opportunities for BMO SP and Invesco NASDAQ
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between BMO and Invesco is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding BMO SP 500 and Invesco NASDAQ 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco NASDAQ 100 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 NASDAQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco NASDAQ 100 has no effect on the direction of BMO SP i.e., BMO SP and Invesco NASDAQ go up and down completely randomly.
Pair Corralation between BMO SP and Invesco NASDAQ
Assuming the 90 days trading horizon BMO SP 500 is expected to generate 0.8 times more return on investment than Invesco NASDAQ. However, BMO SP 500 is 1.24 times less risky than Invesco NASDAQ. It trades about 0.25 of its potential returns per unit of risk. Invesco NASDAQ 100 is currently generating about 0.18 per unit of risk. If you would invest 8,832 in BMO SP 500 on August 31, 2024 and sell it today you would earn a total of 480.00 from holding BMO SP 500 or generate 5.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO SP 500 vs. Invesco NASDAQ 100
Performance |
| Timeline |
| BMO SP 500 |
| Invesco NASDAQ 100 |
BMO SP and Invesco NASDAQ Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO SP and Invesco NASDAQ
The main advantage of trading using opposite BMO SP and Invesco NASDAQ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO SP position performs unexpectedly, Invesco NASDAQ 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 NASDAQ will offset losses from the drop in Invesco NASDAQ'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 |
| Invesco NASDAQ vs. Invesco SP International | Invesco NASDAQ vs. Invesco FTSE RAFI | Invesco NASDAQ vs. Invesco ESG NASDAQ | Invesco NASDAQ vs. Invesco SP International |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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