Correlation Between BetaPro SP and BMO Canadian

Can any of the company-specific risk be diversified away by investing in both BetaPro SP and BMO Canadian 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 BetaPro SP and BMO Canadian into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BetaPro SP 500 and BMO Canadian Dividend, you can compare the effects of market volatilities on BetaPro SP and BMO Canadian 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 BetaPro SP with a short position of BMO Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of BetaPro SP and BMO Canadian.

Diversification Opportunities for BetaPro SP and BMO Canadian

-0.94

Correlation Coefficient

BetaPro SP  BMO Canadian

Pay attention - limited upside

The 3 months correlation between BetaPro and BMO is -0.94. Overlapping area represents the amount of risk that can be diversified away by holding BetaPro SP 500 and BMO Canadian Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Canadian Dividend and BetaPro 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 BetaPro SP 500 are associated (or correlated) with BMO Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Canadian Dividend has no effect on the direction of BetaPro SP i.e., BetaPro SP and BMO Canadian go up and down completely randomly.

Pair Corralation between BetaPro SP and BMO Canadian

Assuming the 90 days trading horizon BetaPro SP 500 is expected to under-perform the BMO Canadian. In addition to that, BetaPro SP is 1.37 times more volatile than BMO Canadian Dividend. It trades about -0.11 of its total potential returns per unit of risk. BMO Canadian Dividend is currently generating about 0.17 per unit of volatility. If you would invest  1,832  in BMO Canadian Dividend on September 4, 2024 and sell it today you would earn a total of  460.00  from holding BMO Canadian Dividend or generate 25.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

BetaPro SP 500  vs.  BMO Canadian Dividend

BetaPro SP 500

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BetaPro SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

BMO Canadian Dividend

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BMO Canadian Dividend are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, BMO Canadian may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with BetaPro SP and BMO Canadian

The main advantage of trading using opposite BetaPro SP and BMO Canadian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BetaPro SP position performs unexpectedly, BMO Canadian 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 BMO Canadian will offset losses from the drop in BMO Canadian's long position.

The idea behind BetaPro SP 500 and BMO Canadian Dividend pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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.