Correlation Between BMO SP and Hamilton Equity
Can any of the company-specific risk be diversified away by investing in both BMO SP and Hamilton Equity 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 Hamilton Equity 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 Hamilton Equity Yield, you can compare the effects of market volatilities on BMO SP and Hamilton Equity 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 Hamilton Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO SP and Hamilton Equity.
Diversification Opportunities for BMO SP and Hamilton Equity
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between BMO and Hamilton is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding BMO SP 500 and Hamilton Equity Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hamilton Equity Yield 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 Hamilton Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hamilton Equity Yield has no effect on the direction of BMO SP i.e., BMO SP and Hamilton Equity go up and down completely randomly.
Pair Corralation between BMO SP and Hamilton Equity
Assuming the 90 days trading horizon BMO SP is expected to generate 1.36 times less return on investment than Hamilton Equity. In addition to that, BMO SP is 1.04 times more volatile than Hamilton Equity Yield. It trades about 0.14 of its total potential returns per unit of risk. Hamilton Equity Yield is currently generating about 0.19 per unit of volatility. If you would invest 1,417 in Hamilton Equity Yield on August 28, 2024 and sell it today you would earn a total of 603.00 from holding Hamilton Equity Yield or generate 42.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 55.26% |
| Values | Daily Returns |
BMO SP 500 vs. Hamilton Equity Yield
Performance |
| Timeline |
| BMO SP 500 |
| Hamilton Equity Yield |
BMO SP and Hamilton Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO SP and Hamilton Equity
The main advantage of trading using opposite BMO SP and Hamilton Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO SP position performs unexpectedly, Hamilton Equity 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 Hamilton Equity will offset losses from the drop in Hamilton Equity'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 |
| Hamilton Equity vs. Hamilton Enhanced Canadian | Hamilton Equity vs. Hamilton Australian Bank | Hamilton Equity vs. Hamilton MidSmall Cap Financials | Hamilton Equity vs. Hamilton Canadian Bank |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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