Correlation Between BetaPro SP and BMO SP

Can any of the company-specific risk be diversified away by investing in both BetaPro SP and BMO 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 BetaPro SP and BMO SP 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 SP 500, you can compare the effects of market volatilities on BetaPro SP and BMO 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 BetaPro SP with a short position of BMO SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of BetaPro SP and BMO SP.

Diversification Opportunities for BetaPro SP and BMO SP

-0.96

Correlation Coefficient

BetaPro SP  BMO SP

Pay attention - limited upside

The 3 months correlation between BetaPro and BMO is -0.96. Overlapping area represents the amount of risk that can be diversified away by holding BetaPro SP 500 and BMO SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO SP 500 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 SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO SP 500 has no effect on the direction of BetaPro SP i.e., BetaPro SP and BMO SP go up and down completely randomly.

Pair Corralation between BetaPro SP and BMO SP

Assuming the 90 days trading horizon BetaPro SP 500 is expected to under-perform the BMO SP. But the etf apears to be less risky and, when comparing its historical volatility, BetaPro SP 500 is 1.01 times less risky than BMO SP. The etf trades about -0.11 of its potential returns per unit of risk. The BMO SP 500 is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  8,307  in BMO SP 500 on August 30, 2024 and sell it today you would earn a total of  897.00  from holding BMO SP 500 or generate 10.8% 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 SP 500

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 very healthy basic indicators, BetaPro SP is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

BMO SP 500

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BMO SP 500 are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, BMO SP may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with BetaPro SP and BMO SP

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

The idea behind BetaPro SP 500 and BMO SP 500 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.

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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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.